[Federal Register Volume 75, Number 86 (Wednesday, May 5, 2010)]
[Proposed Rules]
[Pages 24549-24567]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-10270]


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DEPARTMENT OF COMMERCE

National Oceanic and Atmospheric Administration

50 CFR Part 253

[Docket No. 0908061221-91225-01]
RIN 0648-AY16


Merchant Marine Act and Magnuson-Stevens Fishery Conservation and 
Management Act (Magnuson-Stevens Act) Provisions; Fishing Vessel, 
Fishing Facility and Individual Fishing Quota Lending Program 
Regulations

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

ACTION: Proposed rule; request for comments.

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SUMMARY: The Fisheries Finance Program (FFP or the Program) provides 
long-term financing to the commercial fishing and aquaculture 
industries for fishing vessels, fisheries facilities, aquaculture 
facilities, and individual fishing quotas (IFQs). The Program became a 
direct loan program, as a result of legislation in 1996, replacing a 
guaranteed loan program. The FFP collects loan principal and interest 
from loan recipients and fees from applicants in order to repay monies 
borrowed from the U.S. Treasury. It maintains fixed interest rates that 
are comparable to those of private sector lenders, however the FFP 
allows borrowers to prepay without penalty, and may carry longer

[[Page 24550]]

repayment periods that are more advantageous to borrowers. The FFP does 
not make loans for new vessel construction or for vessel refurbishments 
that would increase harvesting capacity. Since the publication of its 
current regulations on May 1, 1996, the Program's authorizing statutes 
have been amended several times. However, the current regulations 
implementing the FFP have not been amended since 1996. Prior to the 
2006 amendments to the FFP's statutory authorization, the 1996 rules 
for the Program were sufficient to implement the statute. The 2006 
statutory changes have necessitated the current rules. In this action, 
NMFS amends our regulations to reflect the statutory changes to the 
Program, and to provide regulations for two additional lending 
products.

DATES: NMFS invites the public to comment on this proposed rule. 
Comments must be submitted in writing on or before June 4, 2010. 
Comments will be accepted only on Subpart B. Subpart C is unchanged 
except for numbering, therefore, comments will not be accepted.

ADDRESSES: You may submit comments, identified by 0648-AW05, by any one 
of the following methods:
    <bullet> Electronic Submissions: Submit all electronic public 
comments via the Federal eRulemaking Portal http://www.regulations.gov.
    <bullet> Fax: 301-713-2390 x 187, Attn: Earl Bennett.
    <bullet> Mail: Earl Bennett, Acting Chief, Financial Services 
Division, NMFS, Attn: F/MB5, 1315 East-West Highway, SSMC3, Silver 
Spring, MD 20910.
    Instructions: All comments received are a part of the public record 
and will generally be posted to http://www.regulations.gov without 
change. All Personal Identifying Information (for example, name, 
address, etc.) voluntarily submitted by the commenter may be publicly 
accessible. Do not submit Confidential Business Information or 
otherwise sensitive or protected information.
    NMFS will accept anonymous comments (enter N/A in the required 
fields if you wish to remain anonymous). Attachments to electronic 
comments will be accepted in Microsoft Word, Excel, WordPerfect, or 
Adobe PDF file formats only.
    Written comments regarding the burden-hour estimates or other 
aspects of the collection-of-information requirements contained in this 
proposed rule may be submitted to <a href="/cdn-cgi/l/email-protection#c2a7a3b0aeeca0a7acaca7b6b682acada3a3eca5adb4"><span class="__cf_email__" data-cfemail="2a4f4b584604484f44444f5e5e6a44454b4b044d455c">[email protected]</span></a> and by e-mail 
to <a href="/cdn-cgi/l/email-protection#244045524d400a564b57504f4156644b49460a414b540a434b52"><span class="__cf_email__" data-cfemail="6f0b0e19060b411d001c1b040a1d2f00020d410a001f41080019">[email protected]</span></a> or fax to (202) 395-7285.

FOR FURTHER INFORMATION CONTACT: Earl Bennett, at 301-713-2390 or via 
e-mail at <a href="/cdn-cgi/l/email-protection#8aefebf8e6a4e8efe4e4effefecae4e5ebeba4ede5fc"><span class="__cf_email__" data-cfemail="680d091a04460a0d06060d1c1c2806070909460f071e">[email protected]</span></a>.

SUPPLEMENTARY INFORMATION: The FFP is the lending unit of NMFS' 
Financial Services Division. With its main office in Silver Spring, MD, 
the FFP currently has two distinct lending programs. One extends long-
term direct loans to owners of vessels, fishery facilities and 
aquaculture projects, and the other extends long-term direct loans to 
fishermen for the acquisition or refinancing of quota shares in the 
Alaska halibut and sablefish IFQ fishery.

Statutory and Regulatory Background

    The FFP's primary statutory authority is found in Title XI of the 
Merchant Marine Act of 1936, as amended (codified at 46 U.S.C. 53701, 
et seq.). This law authorizes the Secretary of Commerce to guarantee 
the principal and interest of loans made to citizens of the United 
States for the construction, reconstruction or reconditioning of 
fishing vessels. Additional statutory provisions authorize specific 
loan programs, including the Bering Sea/Aleutian Island Crab (BSAI 
Crab) IFQ lending program, 16 U.S.C. 1862(j), and the Western Alaska 
Community Development Quota (CDQ) lending program, 16 U.S.C. 
1855(i)(1). The Magnuson-Stevens Fishery Conservation and Management 
Reauthorization Act, (MSRA), 46 U.S.C. 53706(a)(7), also authorizes the 
FFP to provide direct loans to entities involved in the commercial 
fishing and aquaculture industries for activities that assist in the 
transition to reduced fishing capacity; for technologies or upgrades 
designed to improve collection and reporting of fishery-dependent data; 
to reduce bycatch; to improve selectivity or reduce adverse impacts of 
fishing gear; or to improve safety. The FFP does not lend for projects 
that increase harvesting capacity.
    Initially known as the ``Fisheries Obligation Guarantee Program'' 
(FOG), the Program originally provided repayment guarantees for fishery 
loans made to commercial fishermen. Borrowers executed promissory 
notes, backed by a U.S. Government guarantee; the Program then sold 
these guaranteed notes at auction to third party noteholders. Once a 
note was sold, the borrower was obligated to make payments directly to 
that third-party noteholder, rather than the government. In the event 
that a borrower defaulted on a guaranteed note, the noteholder was 
required to make a payment demand to the Program, which was required to 
pay the noteholder the outstanding principal and interest balance. The 
Program could then proceed to foreclose on the collateral pledged for 
the loan, or collect the loan directly from the defaulting borrower.
    On October 11, 1996, the Congress amended the Merchant Marine Act. 
In section 303 of the Sustainable Fishing Act (SFA), 46 U.S.C. 53701 et 
seq., the Congress transformed the Program from a loan guaranty program 
into a direct lending program. In response, FOG changed its name to 
FFP. These amendments allowed the re-designated FFP to function much 
like a private sector lender. Under the changes, the FFP borrows funds 
from the United States Treasury, and then lends these funds to members 
of the fishing industry. Although the Program maintained (and still 
maintains) a legacy portfolio of guaranteed loans, the amendments to 
the SFA allowed the FFP to make new loans directly to qualified 
borrowers without using private sector intermediaries. This structure 
for the Program is still in place today. Indeed, the Program's loan 
portfolio performs well, with very few delinquent loans, and the FFP 
has been successful in maintaining a negative subsidy under Federal 
Credit Reform Act. The FFP is also authorized to refinance guaranteed 
FOG loans and transition them into direct loans, subject to the 
availability of lending authority. Refinanced FOG loans are subject to 
current FFP requirements.
    However, the FFP has not promulgated new regulations since May 1, 
1996, when the current regulations were published. (61 FR 19171). The 
regulations were not modified after the October 11, 1996, statutory 
amendments because the Program's regulations worked with the new 
legislation. This action would modify the existing Program regulations 
to reflect these statutory changes, and, more importantly, includes 
proposed regulations for two new lending products, BSAI Crab IFQ and 
Western Alaska Community Development Quota (CDQ). Subpart C, relating 
to Interjurisdictional Fisheries, is unchanged by this proposed rule 
except for its redesignation.

Description of Current Lending Policy

    Under present policy, the FFP accepts applications from a wide 
range of potential borrowers, including individuals, partnerships, 
corporations and other business entities. Acceptance of loan 
applications is dependent on the Program having loan authority. The FFP

[[Page 24551]]

makes its lending decisions on a case-by-case basis. Like private 
sector lenders, the FFP considers typical credit factors such as the 
borrower's demonstrated business ability and fishing industry 
experience, credit-worthiness, compliance with specific loan program 
requirements, and available collateral, among others. The FFP declines 
to make loans to applicants who fail to prove that they are acceptable 
credit risks, as well as to any applicants that the Program deems 
ineligible or unqualified. In addition, the Program does not make loans 
for new vessel construction, or for vessel refurbishments that would 
materially increase harvesting capacity.
    Although 46 U.S.C. 53701 does not bar the FFP from financing new 
vessel construction or modifications that increase harvesting capacity, 
the FFP does not lend for these purposes in order to be consistent with 
the agency's larger responsibilities to maintain sustainable fisheries. 
Additionally, in the past, the FFP's annual lending authority has 
contained restrictions that prevented the FFP from making loans that 
increase harvesting capacity.
    Although some loan terms are set by statute (e.g., 46 U.S.C. 
53702(b)(2) sets interest rate; section 53709(a)(4) restricts loan 
principal amounts to not more than 80 percent of the aggregate project 
cost; and section 53710(a)(3) caps most loan terms at 25 years), the 
FFP does not maintain fixed, program-wide minimum collateral standards; 
instead, the FFP adjusts each loan's collateral requirements as 
necessary. In addition to financing the purchase and acquisition of 
property in market transactions, the FFP may also liquidate assets 
(such as permits, quotas, licenses, transferable harvesting or 
operating rights, vessels, real estate, facilities, etc.) that the 
Program acquires through foreclosure, arrest, judicial sale, settlement 
of debts or obligations, debt acceleration, or other collection 
activities. Similar to other lending institutions, the FFP can provide 
financing to purchase assets the program liquidates.
    All loan applicants must either own or hold a long-term lease on 
the property that is the subject of the financing. The FFP requires 
first lien priority on all primary collateral (or adequate substitute 
collateral), and requires that borrowers obtain written approval for 
subordinate liens to third parties. By statute, FFP loans are 
authorized to carry maturities of up to 25 years. However, generally 
the FFP restricts loan terms to the useful life of the assets being 
financed. If the property is leased, the lease term must exceed the 
duration of the loan, allow the FFP to place a lien or mortgage upon 
the leasehold, and authorize the FFP to transfer the lease to another 
party in the event of foreclosure.
    The FFP reserves the right to require additional lending and 
security terms and conditions to address specific borrowers and 
circumstances. The FFP will frequently require loan guarantees or 
security interests in other collateral to bring credit risk to 
acceptable levels. Such guarantees or collateral may be required from 
affiliated businesses, the borrower's principals or majority 
shareholders, or any other persons or entities with a financial 
interest in the borrower, or any individuals holding community property 
rights with the borrower. The FFP requires that borrowers maintain 
insurance appropriate to the collateral, which may include casualty, 
personal injury, risk, breach of warranty, business interruption, key 
man life insurance, title policies, maritime coverage or other forms as 
the FFP determines necessary. Where appropriate, the FFP must be named 
as an ``additional assured,'' added to such coverage as a ``loss 
payee,'' or receive assignment of the policy and insurance proceeds.
    Applicants for FFP loans must be U.S. citizens or entities eligible 
to document a vessel for coastwise trade \1\ under 46 U.S.C. 50501. 
Essentially, this requires business entities to be 75 percent owned by 
U.S. citizens, with key positions and a majority of the board of 
directors (in the case of a corporation) being U.S. citizens. 
Individual applicants must be U.S. citizens, from any of the fifty 
states, the Commonwealth of Puerto Rico, American Samoa, the Territory 
of the U.S. Virgin Islands, Guam, the Republic of the Marshall Islands, 
the Federated States of Micronesia, the Commonwealth of the Northern 
Mariana Islands, or any other possession, commonwealth or territory of 
the U.S. All loan applicants are subject to background and credit 
investigations, which may include reviews for unresolved fishing 
violations, criminal background checks, delinquent debt investigations, 
and credit reports.
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    \1\ Ownership requirements for documenting a vessel for use in 
the coastwise trade and receiving a fisheries endorsement are 
identical.
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    Applicants, who are advised to apply for a loan through regional 
offices located in Gloucester, MA, St. Petersburg, FL, and Seattle, WA, 
must pay the appropriate application fee set out in 46 U.S.C. 53713(b). 
The application fee is one half of one percent of the loan amount 
requested. Half of this fee, known as the ``filing fee,'' is 
nonrefundable when the Program officially accepts the application. The 
second half of the fee, known as the ``commitment fee,'' is earned and 
becomes nonrefundable when the Program issues an Approval-in-Principle 
(AIP) letter. The Program may refund the commitment fee if the FFP 
declines the application or the applicant withdraws the request prior 
to the Program issuing an AIP letter.
    The AIP letter sets out loan terms and conditions. These terms and 
conditions are issued at the Program's discretion; an applicant's 
failure to accept them may result in the termination of the processing 
of the loan. Moreover, the AIP's terms and conditions are reflected in 
the Program's closing documents.

Traditional Lending: Vessels, Shoreside Facilities and Aquaculture 
Projects

    Borrowers of FFP loans can use FFP financing to purchase or 
refurbish an existing fishing vessel, as well as finance the purchase, 
renovation or construction of a fishing facility (such as a processing 
plant) or an aquaculture facility. Although the FFP will not finance 
the construction of new vessels, borrowers may use Program funds to 
refinance the construction costs of a completed vessel. However, the 
loan applicants must have already paid or financed such construction 
costs prior to the submission of their loan application. FFP lending, 
as required by the MSA, as amended, Public Law 109-470, can also be 
used ``to finance sustainable fisheries efforts, including activities 
that assist in the transition to reduced fishing capacity, technologies 
or upgrades to improve collection and reporting of fisheries data, to 
improve or reduce adverse affects of fishing gear, or to improve 
safety.
    In addition to meeting the FFP's general lending requirements, 
borrowers must show that their vessels or facilities have all the 
applicable permits, licenses, quotas, entry rights, or other 
authorizations necessary to harvest or operate their vessels or 
facilities in accordance with the appropriate fisheries management plan 
(FMP), implementing regulations and all other applicable Federal, state 
and local laws.

Current IFQ Lending: Halibut and Sablefish

    The 1996 SFA amendments also authorized the creation of IFQ lending 
programs, identifying two categories of eligible borrowers. Under the 
Magnuson-Stevens Fishery Conservation and Management Act (MSA), section 
303(d)(4), now codified as 16 U.S.C. 1853a(g), the FFP provided IFQ 
financing for (1) the acquisition of

[[Page 24552]]

IFQ by fishermen who fish from ``small vessels,'' and (2) the first 
time purchase of IFQ by ``entry level fishermen.'' IFQ financing is 
fishery specific, and individual Fishery Management Councils (FMCs) 
must request such financing, and may specify borrower eligibility 
criteria (such as definitions for ``small vessels'' and ``entry level 
fishermen''). Under the legislation, the FFP cannot initiate or 
implement an IFQ lending program until the appropriate FMC submits a 
request and provides guidance for the requisite criteria. Although the 
Program suggests that these criteria be included as a part of a fishery 
management plan (FMP), the FFP will accept formal FMC action and 
transmittal of the criteria to develop and create a lending program.
    The two categories of potential borrowers for the quota share loan 
program are fishermen who fish from small vessels, and entry level 
fishermen in the North Pacific Halibut and Sablefish fisheries. Under 
the MSA, as amended, ``Fishermen who fish from small vessels'' are 
defined as those fishermen wishing to purchase IFQ for use on category 
B, C or D vessels (as defined by 50 CFR 679.40), ``whose aggregate 
ownership of individual fishing quotas will not exceed the equivalent 
of a total of 50,000 pounds of halibut and sablefish harvested in the 
fishing year in which a [loan] application is made if the [loan] is 
approved, who will participate aboard the fishing vessel in the harvest 
of fish caught under such quotas, who have at least 150 days of 
experience working as part of the harvest crew in any United States 
commercial fishery, and who do not own in whole or in part any Category 
A or Category B vessel.'' ``Entry level fishermen'' are similarly 
defined, but under the statute this group need not have demonstrated 
fishery experience, and do not need to own halibut and sablefish quota 
shares before receiving a Program loan. Entry level fishermen may 
finance an initial quota share purchase that is equivalent to not more 
than 8,000 pounds of IFQ, as calculated in the year they apply.
    Under the present regulations, FFP loans for the HSQS program are 
awarded on the basis of the FFP's general lending requirements. In 
addition, the FFP requires that preferred ship mortgages be placed on 
all Federally documented vessels owned by IFQ borrowers. For borrowers 
refinancing existing debt, the FFP will not close loans that exceed the 
outstanding amount of debt being refinanced, in order to prevent 
Program funds from being used for ineligible purposes. Refinancing is 
also subject to a cap of 80 percent of the principal of the loan; 
however, if the current market value of the quota shares exceeds the 
loan amount by 20 percent or more, a borrower can refinance without 
providing additional down payment. If the applicant has insufficient 
equity in the collateral, the applicant is required to pay the debt 
down to the acceptable 80 percent level.
    The Program requires that each applicant for sablefish or halibut 
IFQ demonstrate how it meets or will meet the relevant statutory 
conditions at the time of application. To calculate pound limits, the 
FFP applies the IFQ limits for the year in which the borrower submits 
the application. This allows the FFP to use the most recent IFQ pound 
limit when determining loan eligibility. HSQS loans contain covenants 
requiring that the Program's borrowers be aboard their vessels as the 
IFQ from their NMFS financed quota shares are fished. However, the 
Program does not read the statutory text as creating a permanent 
onboard participation requirement. Instead, the condition is included 
among a series of eligibility conditions for originating a loan, and 
the FFP has interpreted it to require that a borrower (1) express the 
intent to participate aboard when he or she applies for a HSQS loan 
and; (2) actually be aboard the vessel while the IFQ from each NMFS 
financed quota share is harvested over the course of a fishing season.
    Accordingly, a borrower under the HSQS could meet the statutory 
onboard participation requirement during the first season of fishing 
after purchasing quota share with loan proceeds. However, in keeping 
with the North Pacific Fishery Management Council's (NP Council) 
expressed policy to maintain the small boat halibut and sablefish 
fisheries as ``owner operated'' fisheries, HSQS loan documents contain 
additional covenants requiring that the Program's borrowers declare 
annually, under penalty of perjury, that they were aboard the vessel as 
fish were harvested under the IFQ derived from their NMFS financed 
quota shares. The FFP may waive the onboard participation loan 
covenants at the request of the borrower, (e.g. to accommodate medical 
IFQ transfers), provided that the borrower can obtain permission from 
the Restricted Access Management (RAM) Division of NMFS Alaska Regional 
office or appropriate office. The Program defers to RAM, or to the 
office that undertakes the duties of this division to issue or manage 
quota shares and the NMFS Alaska Regional office, in determining who is 
eligible to fish under the HSQS. The FFP will not make an HSQS loan to 
anyone who lacks RAM certification of eligibility for the halibut or 
sablefish fisheries.
    Between FY98 and FY08, the FFP approved 240 applications for 
halibut and sablefish IFQ loans. The average amount of these loans 
amounted to $154,209.

Proposed Provisions: CDQ Lending Program

    In 1992, the NP Council established a Community Development Quota 
(CDQ) Program. The intent of this program is to promote fisheries-
related economic development in disadvantaged Western Alaska 
communities. See Guard and Maritime Transportation Act of 2006, Public 
Law 109-241, section 416(a). The remote and isolated nature of Western 
Alaska limits employment opportunities of most residents to jobs within 
their communities, and these areas suffer from high unemployment and 
poverty levels. The CDQ Program was created to provide long-term loans 
to assist these communities in developing the harvesting and processing 
capability in local Bering Sea and Aleutian Island fisheries. Although 
statutory authority for the CDQ Program dates back to 1998, funding for 
the program was not made available until 2006, Public Law 109-241, 
section 416(a). Through these regulations, the FFP intends to implement 
this program.
    Unlike the FFP's other lending programs, the CDQ Program would 
allow the FFP to award loans with maturities of up to thirty (30) 
years, although the Program has the discretion to use shorter periods. 
Aside from extended maturities, CDQ loans are subject to the Program's 
general lending standards and practices; collateral, guarantee and 
other loan requirements may be adjusted to account for individual 
credit risks. Entities eligible to participate are set forth in 16 
U.S.C. 1855(i), and include:
    (1) The villages of Akutan, Atka, False Pass, Nelson Lagoon, 
Nikolski, and Saint George through the Aleutian Pribilof Island 
Community Development Association.
    (2) The villages of Aleknagik, Clark's Point, Dillingham, Egegik, 
Ekuk, Ekwok, King Salmon/Savonoski, Levelock, Manokotak, Naknek, Pilot 
Point, Port Heiden, Portage Creek, South Naknek, Togiak, Twin Hills, 
and Ugashik through the Bristol Bay Economic Development Corporation.
    (3) The village of Saint Paul through the Central Bering Sea 
Fishermen's Association.
    (4) The villages of Chefornak, Chevak, Eek, Goodnews Bay, Hooper 
Bay, Kipnuk, Kongiganak, Kwigillingok, Mekoryuk, Napakiak, Napaskiak,

[[Page 24553]]

Newtok, Nightmute, Oscarville, Platinum, Quinhagak, Scammon Bay, 
Toksook Bay, Tuntutuliak, and Tununak through the Coastal Villages 
Region Fund.
    (5) The villages of Brevig Mission, Diomede, Elim, Gambell, 
Golovin, Koyuk, Nome, Saint Michael, Savoonga, Shaktoolik, Stebbins, 
Teller, Unalakleet, Wales, and White Mountain through the Norton Sound 
Economic Development Corporation.
    (6) The villages of Alakanuk, Emmonak, Grayling, Kotlik, Mountain 
Village, and Nunam Iqua through the Yukon Delta Fisheries Development 
Association.
    (7) Any new groups established by applicable law.

Proposed Crab IFQ Lending Program

    In addition to proposing regulatory language for the CDQ Program, 
this rule would implement the Bering Sea/Aleutian Island (BSAI) crab 
IFQ quota lending program. FFP lending for Bering Sea/Aleutian Island 
(BSAI) crab IFQ quota shares, which is an integral part of the crab 
rationalization program developed by NP Council, will be limited to 
specific crab fisheries and those persons identified as ``captain'' or 
``crew'' on a BSAI crab fishing vessel. Additionally, like other FFP 
loans, crab quota share loan amounts will be limited to 80 percent of 
the actual purchase price, and carry a 25-year maturity. Captains and 
crew must be deemed eligible by a RAM or appropriate authority to own 
Crab QS, and meet all other applicable provisions of the Bering Sea and 
Aleutian Islands King and Tanner Crab Fishery Management Plan (Crab 
FMP) and its implementing regulations in effect at the time of their 
loan closing. The Program will rely on RAM to determine that the 
applicant meets the requirements to own crab quota shares.
    All requirements and standards for halibut and sablefish IFQ and 
general FFP lending guidelines will apply to crab IFQ lending, except 
that the ownership limits after closing an FFP financing are based on a 
percentage of the total allowable catch not on pounds caught. Like 
halibut sablefish quota share, borrowers refinancing existing debt 
cannot borrow more than the outstanding debt and must meet the 80 
percent maximum loan amount.

Summary and Explanation of Proposed Regulatory Changes

    In addition to redesigning the current regulations, this proposed 
action makes the following changes, as explained here.

General Definitions (Sec.  253.10)

    This action changes the general definitions section of part 253 to 
reflect changes in statutory codification and other minor details. 
Specifically, this action eliminates the word ``guarantor'' from the 
definitions of ``Guaranteed Note'' and ``U.S. Note'' to clarify that 
the United States is no longer providing loan guarantees through the 
FFP. In all other respects the substantive definitions of those two 
terms remain the same. Similarly, the terms ``Applicant,'' 
``Application,'' ``Application fee,'' ``Demand,'' ``Fish,'' 
``Guarantee,'' ``Security documents,'' are changed to reflect the 
Program's current status as a direct lender possessing a legacy 
portfolio of loan guarantees. The definitions of the terms, 
``Facility,'' ``Guarantee fee,'' ``Noteholder,'' ``Refinancing,'' 
``Refinancing/assumption fee,'' ``U.S.,'' ``Useful life,'' and 
``Vessel'' remain unchanged from the current regulation.
    Additionally, the definitions for the following terms were changed 
to reflect the recent recodification of the Shipping Statutes. The 
definition of ``Act'' was changed from Title XI of the Merchant Marine 
Act, 1936, as amended to Chapter 537 of title 46 of the U.S. Code, (46 
U.S.C. 53701-35), as may be amended from time to time. The definition 
of ``Actual cost'' was changed from a calculation to a broader 
definition that refers to Sec.  253.16 of the rule for specific 
calculations. The definition of ``Aquaculture facility'' was changed to 
delete from its definition the need for its operation to involve 
commercial purposes. The definition of ``CCF'' was expanded to include 
a citation and the purpose of a CCF account. The definition of 
``Citizen'' was changed to update the citation for citizenship 
qualification. The term ``Contributory project'' has been deleted, and 
its provisions are contained in the revised definition of ``Project.'' 
The terms ``Property'' and ``Project Property'' have been deleted as 
superfluous. The definition of ``Program'' reflects the change in the 
name of the Program, from ``Fisheries Obligation Guarantee Program'' to 
``Fisheries Finance Program'' and provides additional detail on where 
the Program is located. A definition for the term ``RAM'' is added to 
identify the NMFS Alaska Region's Restricted Access Management division 
or other appropriate authority.
    The following terms are new or carry expanded definitions: 
``Approval in principle letter'' is added to describe the document by 
which the Program advises an applicant that its loan application has 
been approved. ``Captain'' is added to provide clarity to a type of 
borrower authorized to be a crab IFQ applicant. ``Charter fishing'' 
replaces the term ``Passenger fishing'' for consistency with the MSA. 
``Crewman'' is added to describe an individual qualified to apply for 
IFQ financing. ``Fisheries harvest authorization'' is defined to 
provide clarity for its use with the IFQ loan programs. ``Fishery 
facility'' is changed to clarify that facilities servicing water craft 
used for charter fishing are included within this definition. 
``Fishing'' is expanded to match the MSA, as amended definition, 
thereby providing additional clarity and specifically excluding 
scientific research activity. ``IFQ'' is added to reflect its use in 
the halibut/sablefish and crab IFQ loan programs. ``Obligor,'' which 
corresponds to the previous term ``Notemaker'' used in the existing 
regulations, is added to match the term used in the Act. ``Origination 
year'' is added to define how the term will be applied to qualify 
applicants for IFQ financing. The definition of ``Project'' has been 
expanded to improve readability and interpretation of the proposed 
regulation. The terms ``Underutilized fishery'' and ``Wise use'' are 
changed to bring them in line with current NMFS standards.
    Except for renumbering and reordering, the contents of new 
Sec. Sec.  253.11, 253.12 and 253.13 (relating to General FFP Credit 
Standards and Requirements, Credit Application Requirements, and the 
Initial Investigation and Approval) remain largely unchanged from Sec.  
253.11 and Sec. Sec.  253.13-16 in the current regulations. The 
sections track the discussion of the Program's lending policies 
described above.

Loan Documents (Sec.  253.14)

    This action also adds a new Sec.  253.14, the provisions of which 
largely reflect those of the current Sec.  253.12. Section 253.14 
eliminates the distinction in the rule between a ``guaranteed note,'' 
which was defined by the 1996 regulations as a note sold to a third 
party and a ``U.S. Note,'' defined as a document presented to the FFP 
in order to allow the FFP to properly file various liens and security 
interests. Since the statute was amended in October 1996 to create the 
direct loan program, these terms are no longer distinct, and this 
change is necessary to codify the statutory determination that the FFP 
is issued only a single note, while the debt is held by the United 
States.
    For Program loans originating before October 11, 1996, the term 
``U.S. Note'' applies to the additional note executed by the borrower. 
However, for loans

[[Page 24554]]

originating after October 11, 1996, ``U.S. Note'' refers to the 
promissory note given to the FFP that evidences the borrower's actual 
indebtedness to the U.S. Keeping with current practice, U.S. Notes are 
assignable, allowing the FFP to sell notes to a third party. This 
provides the Program an additional opportunity to liquidate a defaulted 
debt.
    This rule also clarifies that, during the life of a loan, the FFP 
may advance sums to protect its collateral or security interests. For 
example, the FFP may elect to pay for insurance premiums on collateral 
property when the borrower has failed to do so. This section 
establishes that any sums advanced by the FFP will be added to the 
outstanding loan principal, and incur interest as described by the 
terms of such additional lending.
    In addition to describing the U.S. Note, Sec.  253.14 sets forth 
certain requirements for the Program's security documents. While the 
Program may entertain suggested amendments from borrowers and their 
legal counsel, the FFP retains final authority over the contents of the 
security documents. Under its lending policy, the FFP finances specific 
projects, taking the actual property associated with such projects as 
collateral for the loan. However, to meet its credit risk standards, 
the Program frequently seeks security interests in assets beyond the 
property that is the nominal subject of the financing. The FFP may 
require security interests in other assets owned by the applicant, 
affiliated businesses, and the applicant's owners. In unusual 
circumstances, the Program may consider other substitute collateral of 
equal or greater value. The Program will make this determination on a 
case-by-case basis.

Recourse Against Other Parties (Sec.  253.15)

    This proposed action also creates Sec.  253.14, which provides that 
any personal or business guarantees and additional security required by 
the Program may be secured or unsecured, and may take the form of a 
repayment guaranty or an irrevocable letter of credit. As a general 
policy, the FFP will hold those who stand to receive the primary 
benefit of the project financially accountable for the project's 
performance. For instance, the FFP may require recourse against a 
borrower's major shareholders, parent corporation, affiliated 
businesses, general partners, limited partners, the spouses of 
borrowers who reside in community property states, and any other person 
or entity with a financial interest in the borrower. In the event that 
additional security is unavailable, the value of assets pledged to the 
U.S. must be deemed sufficient to liquidate the loan.

Actual Cost (Sec.  253.16)

    This action adds a new section Sec.  253.16, to provide detail and 
clarity for the term ``Actual cost.'' Lending for shoreside facilities, 
aquaculture facilities and IFQ each require different calculations of 
actual cost of the project to be financed. As it applies to a vessel, 
this provision would allow actual cost to be calculated on a ``cost 
basis,'' meaning that the original cost of a vessel and its capital 
improvements are depreciated over their useful life. This change is 
necessary to allow the FFP to account for value added of the 
depreciated actual cost, which is the basis of the maximum loan amount 
by limited access permits or other harvest privileges that are 
appurtenant to the vessel such as, for example, those that are assigned 
to a vessel, tracked by vessel, or accrue because of vessel ownership. 
Section 253.106 will provide that the actual cost of a vessel can 
reflect the value of an appurtenant harvest privilege, even though 
there may be no cost basis for the appurtenant privilege. The provision 
clarifies that such harvest privileges may only be included if they are 
used aboard or by the vessel that is the subject of the loan and that 
the privileges, themselves, also serve as additional primary collateral 
for the loan. All other aspects of vessel actual cost are unchanged 
from the existing rule.
    This provision clarifies that the FFP will use two different actual 
cost computations to determine the cost basis for loans under the 
Program. For real property owned in fee simple by the borrower, the FFP 
will value the land according to its current market value. Valuing land 
on a cost basis is difficult because land does not incur ongoing 
acquisition costs. Moreover, the value of real property can fluctuate 
over time, and cost basis may not reflect the change in value, if any. 
For example, a land owner, who purchased land 20 years ago, may be 
unable to borrow against the land's current market value if actual cost 
was measured using cost basis. Using current market value allows older 
facilities to obtain a loan that is reasonably proportionate to the 
facility's contemporary value.
    In contrast, the FFP will calculate the actual cost for 
improvements to real property on a cost basis. Cost basis takes the 
original cost of assets, and depreciates them over their estimated 
useful life, to determine the present value of the assets. The values 
of improvements to shoreside and aquaculture facilities are best 
determined by their cost and their expected lifetime. Equipment and 
fixtures are often unique to these facilities and are not usable 
elsewhere, so, alternative methods of evaluation are not readily 
available.
    The FFP will also use cost basis to determine the actual cost of a 
real property lease. Although a lease is a capital asset, it is of 
finite duration and requires that the tenant continually pay rent. A 
lease's actual cost is defined as the net present value of the future 
stream of rent payments, with the present value calculated at the time 
the borrower submits its loan application. The FFP will use the United 
States Department of Treasury Daily Treasury Yield Curve Rate to 
determine the discount rate. To include a lease among collateral, the 
project property must be located on the leased land and the duration of 
the lease must exceed both the nominal term of the financing and any 
additional period that the FFP deems appropriate.
    The FFP will also finance and refinance transferable limited entry 
privileges. Often these privileges are bought and sold in arm's length 
transactions, such that an identifiable market already exists for them. 
The FFP will define the actual cost of transferable limited access 
privileges in two ways, based on their market value. When first 
purchased, these rules define actual cost as current market value, as 
set by purchase price. As with the sale of any good, the value that a 
buyer and seller agree to is generally the best determination of market 
value.
    In the context of refinancing limited entry privileges, these rules 
define actual cost as the current market value of similar privileges. 
Although the value of these privileges may change over time, the 
existence of an identifiable market allows the FFP to use 
contemporaneous comparable sales to determine current market value. 
Additionally, new Sec. Sec.  253.28(d)(2) and 253.30(c)(2) limit the 
aggregate value of a borrower's refinancing transactions. The value of 
a refinancing loan can not exceed the amount required to fully repay 
the QS debt being refinanced.

Insurance (Sec.  253.17)

    Section 253.17 replaces the old Sec.  253.15(c), and sets out new 
provisions for the FFP's review and approval of insurance coverage. 
Currently, the FFP requires each borrower to have and maintain adequate 
insurance coverage. Typically, the FFP requires borrowers to have 
general business coverage, including (but not limited to) worker's

[[Page 24555]]

compensation, seaman's liability, business interruption, inventory 
coverage, cargo coverage, breach of warranty, as well as other 
insurance specific to a loan's collateral package. At a minimum, the 
current rules provide that the United States must be named as the loss 
payee, where applicable, and coverage must provide protection from any 
partial or total loss of collateral.
    Additionally, the current rules require that the Program be named 
an additional assured or co-policyholder, rather than just as a loss 
payee. The FFP also requires that vessel coverage policies attest to 
the vessel's seaworthiness. In order to provide coverage in the event a 
policy term or condition is violated, current FFP rules require that 
borrowers provide additional coverage to protect against breaches of 
warranty. Although the Program requires certain provisions and 
covenants within all policies, the FFP retains broad discretion to 
tailor its insurance requirements to fit the circumstances of each 
individual loan.
    Under the proposed action, the FFP will be required to find both 
the insurer and the amount of coverage to be acceptable. The Program 
will use various insurance rating services to evaluate insurers, and 
reserves the right to refuse coverage from unapproved insurers. All 
required insurance coverage must be maintained continuously during the 
life of the loan. A break in coverage is a security default and grounds 
for foreclosure. While the FFP recognizes that insurers often maintain 
the right to cancel insurance coverage for a variety of reasons, the 
new Program rules require that insurance policies provide for a minimum 
of 20 days advance written notice to the FFP and the insured of 
cancellation for vessels, and 30 days of advance written notice for 
facilities.

Closing (Sec.  253.18)

    The proposed rule redesignates current section Sec.  253.15(g) as 
Sec.  253.18. As in the existing section, the new section clarifies 
that the Program approves loans by sending an applicant an AIP, which 
contains the terms and conditions required to close the loan and 
disburse the proceeds. The AIP must be signed and returned by the 
borrower to show acceptance of the terms and conditions; most of these 
terms and conditions are also incorporated into the actual closing 
documents. Significant changes to the closing documents, which are 
standard forms developed by the Program, require the Program's written 
approval. The FFP may require the borrower's attorney, at the 
borrower's expense, to draft closing documents for transactions 
involving state or local law. Likewise, other closing costs, including 
title search and insurance, escrow fees and document preparation shall 
be at the borrower's expense.
    Finally, the regulations provide that neither the United States nor 
the FFP will be liable for any adverse consequences related to the 
timing of closing. The Program will only close loans when all 
requirements are satisfactorily completed. This section encourages the 
parties to a loan transaction to work closely with the Program to 
assure closing on a timely basis.

Dual-use CCF (Sec.  253.19)

    The Capital Construction Program allows fishermen to deposit 
profits in a capital construction fund (CCF) earmarked account and 
defer the taxes associated with such profits. This section provides 
that CCF accounts can be considered as an asset, and may be pledged as 
collateral for Program financings. This section is unchanged, except 
for renumbering, from Sec.  253.12(c) of the current regulations, to 
Sec.  253.19.

Fees (Sec.  253.20)

    This rule would redesignate Sec.  253.16 of the current rule to 
Sec.  253.20. Aside from acknowledging the application fees set out in 
Sec.  253.12(b) of the proposed rule, the new Sec.  253.20 relating to 
guarantee fees and refinancing or assumption fees of the rule will 
largely remain unchanged from the existing Sec.  253.16.
    Under the guaranteed loan program, the Program will still require 
that each borrower pay a fee of one percent per year on the average 
unpaid principal balance. This fee is not applicable to direct loans. 
Although the Program does not originate any new guaranteed loans, the 
FFP continues to maintain some legacy of FOG loans. For such guaranteed 
loans, this section indicates that the first year's guarantee fee was 
due when the loan closed. However, this new section requires that each 
subsequent year's fee on current guaranteed loans is due in advance of 
each year, and is based on the scheduled repayments for the coming 
year. Subsequent year annual fees will continue to be collected until 
the guaranteed loan is paid in full. Once paid, guarantee fees are not 
refundable; accordingly, paying off a guarantee loan during the fee 
year will not result in a credit or refund.
    The refinancing and assumption fees addressed in this section apply 
only when borrowers refinance or assume loans already in the Program's 
portfolio. It does not apply when the FFP refinances loans held by 
other lenders. Instead, a standard application fee is due upon 
submission of the application for refinancing such ``outside'' 
financing. Internal refinancing or assumption fees are not refundable, 
though the FFP may choose to waive such fees if the primary purpose of 
the refinancing is to protect the interest of the United States.
    All fees mentioned in this section are sent to the FFP's lock box 
address. The mailing address for the lock box is currently: U.S. 
Department of Commerce, NOAA, P.O. Box 979008, St. Louis, MO 63197-
9008.
    The FFP requires that the borrower include the loan number on such 
payments.

Demand by Guaranteed Noteholder and Payment (Sec.  253.21)

    As mentioned above, the Program has retained, and will continue to 
do so, a portfolio of guaranteed loans. The holders of these debts 
possess a repayment guarantee. In the event of payment default, the 
holder of the note makes a ``demand'' for payment to the U.S. This new 
section, drawn from previous Sec.  253.17 of the regulations, 
prescribes that such demand must be made in writing and include a 
complete payment history for the loan on which demand is made.

Program Operating Guidelines (Sec.  253.22)

    This new section will authorize the FFP to issue non-regulatory 
policy and administrative guidelines, as needed. In the evolving arena 
of fisheries and fisheries management, the Program may have to adjust 
its operations to stay current and effectively administer the Program.

Default and Liquidation (Sec.  253.23)

    Under 46 U.S.C. 53722, there are a wide variety of actions 
available to the Program if a loan defaults. Program officials will 
work with its attorneys and the U.S. Department of Justice, as 
appropriate, to determine a course of action. This new section 
reaffirms the Program's broad authority to use any means available to 
the Federal Government to recover debt owed to the United States.

Enforcement Violations and Adverse Actions (Sec.  253.24)

    The FFP believes that it is inconsistent with wise and good use of 
the Program funds, and contrary to the public interest, to provide 
financing to parties with unresolved fisheries enforcement violations. 
Thus, under this new provision, Program borrowers

[[Page 24556]]

could face a security default and foreclosure if they incur a fisheries 
violation. This action provides that the Program may delay the 
approval, closing or disbursement of loans to parties who have an 
outstanding Notice of Violation and Assessment issued to them by NMFS 
enforcement or other authorities. The Program will suspend, cancel or 
rescind the processing of any application or disbursement if it 
discovers an unresolved final and unappealable sanction.
    In addition, this section provides that the FFP will not approve, 
close or disburse a loan unless such fine or penalty has (1) been fully 
resolved; or (2) the parties have entered into an agreement to pay the 
penalty in installments, and all payments due under such installment 
agreement are current. Any failure to resolve such penalties could 
result in disqualification. This policy was originally announced in a 
notice published in the Federal Register on January 4, 1984 (49 FR 
491).

Other Administrative Requirements (Sec.  253.25)

    This action reaffirms that borrowers must comply with all 
applicable Federal statutory and administrative requirements. Some of 
these provisions include compliance with the Debt Collection Act, 
providing various certifications under 15 CFR part 26 (Nonprocurement 
Debarment and Suspension, Anti-Lobbying, Drug free work place, etc.), 
and the Paperwork Reduction Act (PRA). This section also clarifies that 
all loan applications are subject to investigation by the United 
States, and may involve the Department of Commerce's Inspector General, 
the U.S. Department of Justice, and NMFS Enforcement.

Traditional Loans (Sec.  253.26)

    For clarity, the proposed rule compiles existing policies and 
requirements for vessel and facility lending into this new section. 
This section establishes an 80 percent actual cost financing limit, and 
retains the current maximum loan term of 25 years or the useful life of 
the assets being financed, whichever is shorter. Consistent with the 
existing Sec.  253.11 provisions, Sec.  253.26 provides that the FFP 
will not grant financing for new vessel construction or for projects 
that materially increase harvesting capacity. This action retains 
existing provisions found at Sec.  253.11, which allow the FFP to 
finance or refinance eligible projects, including refinancing the 
Program's legacy Fisheries Obligation Guarantee loans as direct loans. 
The FFP would be allowed to reimburse borrowers who have already paid 
or financed the cost of refurbishing or constructing vessels. In 
addition to being found credit-worthy, applicants for such 
reimbursements must have the required fishing permits and authorities. 
The FFP is required to verify that vessels have the proper permits, 
licenses, quotas, entry rights, etc. required to legally harvest fish 
under the appropriate fisheries management plan and all applicable 
regulations and law.
    The proposed rule also adds text, in compliance with 46 U.S.C. 
53706(a)(3), that authorizes the FFP to liquidate and finance the 
purchase of collateral that the Program acquires, including those 
acquired by accelerating, paying or settling debts or obligations, 
through foreclosure, or at judicial sale. Financing these assets 
requires the availability and use of loan authority. This section also 
includes provisions reflecting changes brought on by the recent changes 
to the MSA, as amended, including lending for fisheries modernization 
and to support sustainable fisheries efforts.

IFQ Financing (Sec.  253.27)

    This new section contains the Program's general policy and 
requirements for establishing IFQ lending programs, as authorized by 
the MSA, as amended. The FFP must have a request from an FMC to approve 
and implement an IFQ loan Program. Requests from an FMC should include 
their suggested definitions of:

Small vessel;
Entry-level fishermen; and
Fishermen who fish from a small vessel.

    Council requests under this provision may include any other 
suggested terms or conditions. However, the FFP can only incorporate 
those suggestions that the Program determines to be feasible, are not 
excessively burdensome, and are not otherwise prohibited by applicable 
law, including FFP rules or operating guidelines.
    Although the Program regards the harvest privilege as the primary 
collateral in an IFQ loan, it will take additional security pledges, as 
necessary, to maintain the priority of the FFP's interest in the IFQ 
and to reduce credit risk, in order to protect the interest of the U.S. 
The FFP prefers quarterly payments of principal and interest to both 
reduce the number of transactions processed by the agency's accounting 
office and enhance tracking of loan performance. Pursuant to 46 U.S.C. 
53710(a)(3), maximum maturity for an IFQ loan is 25 years.

Halibut Sablefish IFQ Loans (Sec.  253.28)

    This section codifies existing FFP HSQS lending policies and 
guidance from the Halibut and Sablefish Fisheries Quota-Share Loan 
Program (63 FR 28986, May 27, 1998).
    In addition to the pound limits, onboard requirements, and other 
eligibility limitations, all HSQS loans would be subject to the 
Program's general standards and requirements. Collateral, guarantee and 
other requirements may be adjusted to match each individual credit 
risk. As with IFQ financing generally, under this new provision the FFP 
may refinance existing debt associated with HSQS. However, the FFP has 
determined that providing a HSQS borrower with funds in excess of the 
borrower's existing and outstanding debt is inconsistent with sound 
fiscal management. Therefore, HSQS borrowers seeking to refinance debt 
are subject to the FFP's 20 percent borrower's equity minimum.
    Under this rule, the FFP will defer to the RAM division to 
determine a borrower's eligibility to hold HSQS. To purchase and retain 
HSQS, the potential owner must apply to RAM, meet the applicable 
requirements, and receive certification from RAM that they are eligible 
to hold HSQS. This section requires that an applicant for financing 
under the HSQS loan program possess or be able to obtain such 
certificate. Failure to obtain such certification in a timely manner 
may cause the applicant to lose its application processing priority.

CDQ Loans (Sec.  253.29)

    This proposed rule would add a section establishing the CDQ lending 
program. Established by statute in 1998, this lending program allows 
CDQ Groups to finance certain fisheries related projects in Bering Sea 
and Aleutian Islands. CDQ loans are subject to all general FFP 
standards and requirements; collateral, guarantee and other 
requirements may be adjusted in accordance to each project's individual 
credit risk. However, CDQ loans may carry maturity terms of 30 years, 5 
years longer than typical Program lending. This section is necessary 
because, although the CDQ program was authorized in 1998, there were no 
appropriations until 2006 to implement the program. The FFP is poised 
to move forward with the program and needs the implementing regulations 
to proceed.

Crab IFQ Loans (Sec.  253.30)

    This new section provides regulatory provisions specific to the 
crab IFQ loan program. Although crab IFQ loans will

[[Page 24557]]

be very similar to HSQS loans, the NP Council has limited participant 
eligibility to crab captains or crewmen on BSAI crab fishing vessels. 
This section contains additional terms that codify the NP Council's 
intent. It provides that captains and crew must be certified by RAM as 
eligible to hold crab quota share, and meet all other applicable 
provisions of the Crab FMP in effect at the time of their loan closing. 
Like other FFP loan requirements, the section limits loan amounts to 80 
percent of the purchase price, as required by statute.
    This section also limits refinancing to persons whose initial 
purchase of Crab QS would, in accordance with the program's statutory 
authority, have been eligible for FFP financing. Like HSQS loans, the 
Program will only finance up to 80 percent of the quota share's current 
value, and it will limit the amount refinanced to the amount required 
to fully repay the outstanding debt being refinanced. In addition to 
requiring that such persons meet all other Program lending and Crab FMP 
requirements in effect at the time of the refinancing, the applicant 
must have established equity in the collateral used to support the 
loan. If they fail to have the requisite equity margin (measured as the 
difference between the value of the primary collateral and the amount 
of the loan), applicants seeking refinancing will be required to pay 
the debt down to the acceptable 80 percent level.
    In order to increase the safety and practicality of the lending 
program, the NP Council recommended that ``small vessels'' be defined 
as all vessels in the BSAI crab fisheries. They also expanded the 
qualifications for RAM determinations of eligibility to include 
applicants who have made at least one delivery in a fishery subject to 
the crab rationalization program in two of the three years prior to the 
application for the crab quota share loan. Unlike with HSQS, for which 
participation in the loan program is restricted by an IFQ pound limit, 
the NP Council recommended that ownership limitations in the Crab IFQ 
lending program be based on a percentage of the initial quota share 
pool for each crab fishery. This section includes each of these 
modifications.

Classification

    This proposed rule is published under the authority of, and is 
consistent with, Chapter 537 of the Shipping Act and the MSA, as 
amended. The NMFS Assistant Administrator has determined that this 
proposed rule is consistent with the MSA, as amended, and other 
applicable law, subject to further consideration after public comment.

Executive Order 12866

    This proposed rule has been determined to be not significant for 
purposes of Executive Order 12866.
    This rule does not duplicate, overlap, or conflict with any other 
relevant Federal rules.

Paperwork Reduction Act

    Notwithstanding any other provision of the law, no person is 
required to respond to, and no person shall be subject to penalty for 
failure to comply with, a collection of information subject to the 
requirements of the PRA, unless that collection of information displays 
a currently valid OMB Control Number.
    This proposed rule contains collections-of-information subject to 
the PRA, which have been approved by OMB under control number. The 
application requirements contained in these rules have been approved 
under OMB control number 0648-0012. The applications for the halibut/
sablefish quota share crew member eligibility certificate have been 
approved under OMB control number 0648-0272. Public reporting burden 
for placing an application for FFP financing is estimated to average 
eight hours per response, including the time for reviewing 
instructions, searching existing data sources, gathering and 
maintaining the data needed, and completing and reviewing the 
collection of information.
    Send comments regarding this burden estimate, or any other aspect 
of this data collection, including suggestions for reducing the burden, 
to NMFS (see ADDRESSES) and by e-mail to <a href="/cdn-cgi/l/email-protection#7c181d0a1518520e130f0817190e3c13111e5219130c521b130a"><span class="__cf_email__" data-cfemail="97f3f6e1fef3b9e5f8e4e3fcf2e5d7f8faf5b9f2f8e7b9f0f8e1">[email protected]</span></a> or 
fax to (202) 395-7285.

Regulatory Flexibility Act

    The Chief Counsel for Regulation of the Department of Commerce has 
certified to the Chief Counsel for Advocacy of the Small Business 
Administration (SBA) that this proposed rule, if adopted, would not 
have a significant economic impact on a substantial number of small 
entities.
    The Regulatory Flexibility Act (RFA), 5 U.S.C. 601, et seq., 
requires that, ``[w]henever an agency is required by section 553 of 
this title [5 USCS Sec.  553], or any other law, to publish general 
notice of proposed rulemaking for any proposed rule, or publishes a 
notice of proposed rulemaking for an interpretative rule involving the 
internal revenue laws of the United States, the agency shall prepare 
and make available for public comment an initial regulatory flexibility 
analysis. Such analysis shall describe the impact of the proposed rule 
on small entities.'' 5 U.S.C. 603(a). However, where an agency can 
certify ``that the rule will not, if promulgated, have a significant 
economic impact on a substantial number of small entities'' then an 
agency need not undertake a full regulatory flexibility analysis. 5 
U.S.C. 605(b).
    The proposed rule replaces the current FFP rule, subpart B of 50 
CFR 253, as published in the Federal Register on May 1, 1996 (61 FR 
19172). The objective of this rule is to update the FFP rule to reflect 
statutory changes and codify all the existing FFP authorities into 50 
CFR part 253 in the Code of Federal Regulations. As codified in this 
rule, the FFP will offer small businesses in Alaska and native Alaskan 
communities a source of long-term capital for various segments of the 
commercial fishing and aquaculture industries. Participation in the FFP 
is entirely voluntary. This rule imposes no mandatory requirements on 
any business. These changes are required by recent amendments to the 
Program's authorizing statutes. Additionally, promulgation of new 
regulations is necessary to implement the FFP's new lending programs. 
To gain key efficiencies, this proposed rule combines these Program 
operating requirements into a single rulemaking. Having all aspects of 
the FFP's rules located in one rule will assist the public in reviewing 
the potential application of the FFP to their need.
    Specifically, these rules enact regulatory changes to create new 
FFP programs authorized in legislation in 2006 will be implemented 
under 50 CFR part 253, subpart B. Additionally, this rule will create 
new Sec. Sec.  253.10 through 253.30.50. Part 253, subpart C 
(Sec. Sec.  253.20 through 253.24) will be redesigned as Subpart C, 
sections 253.40 through 253.44, without change.
    The RFA defines a small fishing business as one that has an annual 
revenue of $4.0 million or less. Additionally, ``small governmental 
jurisdictions'' are defined as governments of cities, counties, towns, 
townships, villages, school districts, or special districts with 
populations of fewer than 50,000. As defined in RFA, the small entities 
that this rule may affect include, but are not limited to, vessel 
owners, vessel operators, fish dealers, individual fishermen, small 
corporations, others engaged in commercial and recreational activities 
regulated by NOAA and native Alaskan governmental jurisdictions. In 
addition, the rule would affect some larger businesses. Notably, 
because the FFP is

[[Page 24558]]

a voluntary program that provides loans to qualified applicants, no 
entities--larger or small--would be directly regulated by this rule.
    NMFS has examined the business size status of applicants approved 
by the FFP during the last eleven years during which the FFP has been a 
direct lender. During this period, the FFP approved 425 applications. 
Of these applications, 146, or 35 percent of the total number of 
businesses that could be determined to be small or large entities, were 
small businesses as defined by the SBA.\2\ In addition, 221 applicants, 
or 53 percent of all applicants, were individual or sole 
proprietorships. Thus, most of the loans that have been recently issued 
by the FFP were to small entities.
---------------------------------------------------------------------------

    \2\ There were nine records for which NMFS was unable to 
determine the size of the applicant.
---------------------------------------------------------------------------

    The FFP approved loans for:

------------------------------------------------------------------------
                                                   Number     Percentage
------------------------------------------------------------------------
Individuals/sole proprietorships..............          221           53
Small Business................................          146           35
Large Business................................           49           12
------------------------------------------------------------------------

    Since it codifies existing FFP statutes and policies, this action 
will not create new reporting requirements for small entities 
participating in the FFP. Although the FFP requires certain supporting 
documentation during the life of a loan, the FFP's requirements do not 
impose unusual burdens when compared to the burdens imposed by other 
lenders. Moreover, because the basic need for financing would continue 
to exist without the FFP, the small entities seeking financing would 
still need to comply with similar, if not identical, requirements 
imposed by another lender. Records required to participate in the FFP 
are usually within the normal business records already maintained by 
small business entities. The time required for small entities to meet 
these requirements would be less that five hours per application.
    In addition, to ease burdens on loan applicants that are small 
entities, the proposed rules vary the scope of the requested 
information in accordance with the size and complexity of the 
applicant's operation. These rules request information from applicants 
that is already available to them, such as income tax returns, 
insurance policies, permits, licenses, etc. Depending on circumstances, 
the FFP may require other supporting documents, including internal 
financial statements, audited financial statements, property 
descriptions, and other documents that can be acquired at reasonable 
cost if they are not already available.
    The FFP has only positive impacts on small entities. It is a source 
of long-term capital and imposes no regulatory requirements on small 
business outside of those applying for financing. FFP applicants make a 
voluntary decision to use the Program. Both small and large entities 
benefit from the availability of long-term, fixed rate financing. CDQ 
groups and communities benefit from the positive economic opportunities 
that FFP lending provides.
    Because participation is voluntary and requires considerable effort 
and the outlay of an application fee, all FFP applicants are assumed to 
have made a determination that using FFP financing incurs a benefit, 
such that the FFP's long-term, fixed rate financing provides a positive 
economic impact. Importantly, the FFP does not regulate or manage the 
affairs of its borrowers, and the regulations impose no additional 
compliance, operating or other fees or costs on small entities.
    Because this regulation will impose no significant costs on any 
small entities, but rather will provide small and large entities with 
benefits, the economic impact on small entities, if any, is expected to 
be minimal at worst, but likely it will be positive. Accordingly, this 
rule will not substantially impact a significant number of small 
businesses.
    As a result of this certification, an initial regulatory 
flexibility analysis is not required and none has been prepared.

List of Subjects in 50 CFR Part 253

    Aquaculture, Community development groups, Direct lending, 
Financial assistance, Fisheries, Fishing, Individual fishing quota.

    Dated: April 26, 2010.
Samuel D. Rauch III,
Deputy Assistant Administrator for Regulatory Services, National Marine 
Fisheries Service.
    For the reasons set forth in the preamble, 50 CFR part 253 is 
proposed to be amended by revising part 253 as follows:

PART 253B-FISHERIES ASSISTANCE PROGRAMS

Subpart A--General
Sec.
253.1 Purpose
Subpart B--Fisheries Finance Program
253.10 General definitions.
253.11 General FFP credit standards and requirements.
253.12 Credit application.
253.13 Initial investigation and approval.
253.14 Loan documents.
253.15 Recourse against other parties.
253.16 Actual cost.
253.17 Insurance.
253.18 Closing.
253.19 Dual-use CCF.
253.20 Fees.
253.21 Demand by guaranteed noteholder and payment.
253.22 Program operating guidelines.
253.23 Default and liquidation.
253.24 Enforcement violations and adverse actions.
253.25 Other administrative requirements.
253.26 Traditional loans.
253.27 IFQ financing.
253.28 Halibut sablefish IFQ loans.
253.29 CDQ loans.
253.30 Crab IFQ loans.
253.31-253.49 [Reserved]
Subpart C--Interjurisdictional Fisheries
253.50 Definitions.
253.51 Apportionment.
253.52 State projects.
253.53 Other funds.
253.54 Administrative requirements.

    Authority: 46 U.S.C. 53701 and 16 U.S.C. 4101 et seq.

Subpart A--General


Sec.  253.1  Purpose.

    (a) The regulations in this part pertain to fisheries assistance 
programs. Subpart B of these rules governs the Fisheries Finance 
Program (FFP or the Program), which makes capacity neutral long-term 
direct fisheries and aquaculture loans. The FFP does all credit 
investigations, makes all credit determinations and holds and services 
all credit collateral.
    (b) Subpart C implements Title III of Public Law 99-659 (16 U.S.C. 
4100 et seq.), which has two objectives:
    (1) Promote and encourage State activities in support of the 
management of interjurisdictional fishery resources identified in 
interstate or Federal fishery management plans; and
    (2) Promote and encourage management of interjurisdictional fishery 
resources throughout their range.
    (c) The scope of this part includes guidance on making financial 
assistance awards to States or Interstate Commissions to undertake 
projects in support of management of injurisdictional fishery resources 
in both the executive economic zone (EEZ) and State waters, and to 
encourage States to enter into enforcement agreements with either the 
Department of Commerce or the Department of the Interior.

Subpart B--Fisheries Finance Program


Sec.  253.10  General definitions.

    The terms used in this subpart have the following meanings:
    Act means Chapter 537 of Title 46 of the U.S. Code, (46 U.S.C. 
53701-35), as may be amended from time to time.

[[Page 24559]]

    Actual cost means the sum of all amounts for a project paid by an 
obligor (or related person), as well as all amounts that the Program 
determines the obligor will become obligated to pay, as such amounts 
are calculated by Sec.  253.16.
    Applicant means the individual or entity applying for a loan (the 
prospective obligor).
    Application means the documents provided to or requested by NMFS 
from an applicant to apply for a loan.
    Application fee means 0.5 percent of the dollar amount of financing 
requested.
    Approval in principle letter (AIP) means a written communication 
from NMFS to the applicant expressing the agency's commitment to 
provide financing for a project, subject to all applicable regulatory 
and Program requirements and in accordance with the terms and 
conditions contained in the AIP.
    Aquaculture facility means land, structures, appurtenances, 
laboratories, water craft built in the U.S., and any equipment used for 
the hatching, caring for, or growing fish under controlled 
circumstances for commercial purposes, as well as the unloading, 
receiving, holding, processing, or distribution of such fish.
    Captain means a vessel operator or a vessel master.
    Capital Construction Fund (CCF), as described under 46 U.S.C. 
53501-17, allows owners of eligible vessels to reserve capital for 
replacement vessels, additional vessels, reconstruction of vessels, or 
reconstructed vessels, built in the United States and documented under 
the laws of the United States, for operation in the fisheries of the 
United States.
    Charter fishing means fishing from a vessel carrying a ``passenger 
for hire,'' as defined in 46 U.S.C. 2101(21a), such passenger being 
engaged in recreational fishing, from whom consideration is contributed 
as a condition of carriage on the vessel, whether directly or 
indirectly flowing to the owner, charterer, operator, agent, or any 
other person having an interest in the vessel.
    Citizen means a ``citizen of the United States,'' as described in 
46 U.S.C. 104, or an entity who is a citizen for the purpose of 
documenting a vessel in the coastwise trade under 46 U.S.C. 50501.
    Crewman means any individual, other than a captain, a passenger for 
hire, or a fisheries observer working on a vessel that is engaged in 
fishing.
    Demand means a noteholder's request that a debtor or guarantor pay 
a note's full principal and interest balance.
    Facility means a fishery or an aquaculture facility.
    Fish means finfish, mollusks, crustaceans and all other forms of 
aquatic animal and plant life, other than marine mammals and birds.
    Fisheries harvest authorization means any transferable permit, 
license or other right, approval, or privilege to engage in fishing.
    Fishery facility means land, land structures, water craft that do 
not engage in fishing, and equipment used for transporting, unloading, 
receiving, holding, processing, preserving, or distributing fish for 
commercial purposes (including any water craft used for charter 
fishing).
    Fishing means:
    (1) The catching, taking, or harvesting of fish;
    (2) The attempted catching, taking, or harvesting of fish;
    (3) Any other activity which can reasonably be expected to result 
in the catching, taking, or harvesting of fish;
    (4) Any operations at sea in support of, or in preparation for, any 
activity described in (1) through (3) above.
    (5) Fishing does not include any scientific research activity which 
is conduced by a scientific research vessel.
    Fishing industry for the purposes of this part, means the broad 
sector of the national economy comprised of persons or entities that 
are engaged in or substantially associated with fishing, including 
aquaculture, charter operators, guides, harvesters, outfitters, 
processors, suppliers, among others, without regard to the location of 
their activity or whether they are engaged in fishing for wild stocks 
or aquaculture.
    Guarantee means a guarantor's contractual promise to repay 
indebtedness if an obligor fails to repay as agreed.
    Guarantee fee means one percent of a guaranteed note's average 
annual unpaid principal balance.
    Guaranteed note means a promissory note from an obligor to a 
noteholder, the repayment of which the United States guarantees.
    IFQ means Individual Fishing Quota, which is a Federal permit under 
a limited access system to harvest a quantity of fish, expressed by a 
unit or units representing a percentage of the total allowable catch of 
a fishery that may be received or held for exclusive use by a person. 
IFQ does not include community development quotas.
    Noteholder means a guaranteed note payee.
    Obligor means a party primarily liable for payment of the principal 
of or interest on an obligation, used interchangeably with the terms 
``note payor'' or ``notemaker.''
    Origination year means the year in which an application for a loan 
is accepted for processing.
    Program means the Fisheries Finance Program, Financial Services 
Division, National Marine Fisheries Service, National Oceanic and 
Atmospheric Administration, U.S. Department of Commerce.
    Project means:
    (1) The refinancing of construction of a new fishing vessel or the 
financing or refinancing of a fishery or aquaculture facility or the 
refurbishing or purchase of an existing vessel or facility, including, 
but not limited to, architectural, engineering, inspection, delivery, 
outfitting, and interest costs, as well as the cost of any consulting 
contract the Program requires;
    (2) The purchase or refinance of any limited access privilege, IFQ, 
fisheries access right, permit, or other fisheries harvest 
authorization, for which the actual cost of the purchase of such 
authorization would be eligible under the Act for direct loans;
    (3) Activities (other than fishing capacity reduction, as set forth 
in part 600.1000 of this title) that assist in the transition to 
reduced fishing capacity;
    (4) Technologies or upgrades designed to improve collection and 
reporting of fisherydependent data, to reduce bycatch, to improve 
selectivity or reduce adverse impacts of fishing gear, or to improve 
safety; or
    (5) Any other activity that helps develop the U.S. fishing 
industry, including, but not limited to, measures designed or intended 
to improve a vessel's fuel efficiency, to increase fisheries exports, 
to develop an underutilized fishery, or to enhance financial stability, 
financial performance, growth, productivity, or any other business 
attribute related to fishing or fisheries.
    RAM means the Restricted Access Management division in the Alaska 
Regional Office of the National Marine Fisheries Service or the office 
that undertakes the duties of this division to issue or manage quota 
shares.
    Refinancing means newer debt that either replaces older debt or 
reimburses applicants for previous expenditures.
    Refinancing/assumption fee means a one time fee assessed on the 
principal amount of an existing FFP note to be refinanced or assumed.
    Refurbishing means any reconstruction, reconditioning, or other 
improvement of existing vessels or facilities, but does not include 
routine repairs or activities characterized as maintenance.
    Security documents mean all documents related to the collateral

[[Page 24560]]

securing the U.S. Note's repayment and all other assurances, 
undertakings, and contractual arrangements associated with financing or 
guarantees provided by NMFS.
    Underutilized fishery means any stock of fish (a) harvested below 
its optimum yield or (b) limited to a level of harvest or cultivation 
below that corresponding to optimum yield by the lack of aggregate 
facilities.
    U.S. means the United States of America and, for citizenship 
purposes, includes the fifty states, Commonwealth of Puerto Rico, 
American Samoa, the Territory of the U.S. Virgin Islands, Guam, the 
Republic of the Marshall Islands, the Federated States of Micronesia, 
the Commonwealth of the Northern Mariana Islands, and any other 
commonwealth, territory, or possession of the United States, or any 
political subdivision of any of them.
    U.S. Note means a promissory note payable by the obligor to the 
United States.
    Useful life means the period during which project property will, as 
determined by the Program, remain economically productive.
    Vessel means any vessel documented under U.S. law and used for 
fishing.
    Wise use means the development, advancement, management, 
conservation, and protection of fishery resources, that is not 
inconsistent with the National Standards for Fishery Conservation and 
Management (16 U.S.C. 1851) and any other relevant criteria, as may be 
specified in applicable statutes, regulations, Fishery Management 
Plans, or NMFS guidance.


Sec.  253.11  General FFP credit standards and requirements.

    (a) Principal. Unless explicitly stated otherwise in these 
regulations or applicable statutes, the amount of any loan may not 
exceed 80 percent of actual cost, as such term is described in Sec.  
253.16; provided that, the Program may approve an amount that is less, 
in accordance with its credit determination.
    (b) Interest rate. Each loan's annual interest rate will be 2 
percent greater than the U.S. Department of Treasury's cost of 
borrowing public funds of an equivalent maturity at the time the loan 
closes.
    (c) Ability and experience requirements. An obligor and the 
majority of its principals must demonstrate the ability, experience, 
resources, character, reputation, and other qualifications the Program 
deems necessary for successfully operating the project property and 
protecting the Program's interest in the project.
    (d) Lending restrictions. Unless it can document that unique or 
extraordinary circumstances exist, the Program will not provide 
financing:
    (1) For venture capital purposes; or,
    (2) To an applicant who cannot document successful fishing industry 
ability and experience of a duration, degree, and nature that the 
Program deems necessary to successfully repay the requested loan.
    (e) Income and expense projections. The Program, using conservative 
income and expense projections for the project property's operation, 
must determine that projected net earnings can service all debt, 
properly maintain the project property, and protect the Program's 
interest against risks of loss, including the industry's cyclical 
economics.
    (f) Working capital. The Program must determine that a project has 
sufficient initial working capital to achieve net earnings projections, 
fund all foreseeable contingencies, and protect the Program's interest 
in the project. In making its determination, the Program will use a 
conservative assessment of an applicant's financial condition, and at 
the Program's discretion, some portion of projected working capital 
needs may be met by something other than current assets minus 
liabilities (i.e., by a line or letter of credit, non-current assets 
readily capable of generating working capital, a guarantor with 
sufficient financial resources, etc.).
    (g) Audited financial statements. Audited financial statements will 
ordinarily be required for any obligor with large or financially 
complex operations whose financial condition the Program believes 
cannot be otherwise assessed with reasonable certainty.
    (h) Consultant services. Expert consulting services may be 
necessary to help the Program assess a project's economic, technical, 
or financial feasibility. The Program will notify the applicant if an 
expert is required. The Program will select and employ the necessary 
consultant, but require the applicant to reimburse the Program for any 
fees charged by the consultant. In the event that an application 
requires expert consulting services, the loan will not be closed until 
the applicant fully reimburses the Program. This cost may, at the 
Program's discretion, be included in the amount of the note. For a 
declined application, the Program may reimburse itself from the 
application fee as described in Sec.  253.12, including any portion 
known as the commitment fee that could otherwise be refunded to the 
applicant.
    (i) Property inspections. The Program may require adequate 
condition and valuation inspection of all property as the basis for 
assessing the property's worth and suitability for lending. The Program 
may also require these at specified periods during the life of the 
loan. These must be conducted by competent and impartial inspectors 
acceptable to the Program. Inspection cost will be at an applicant's 
expense. Those occurring before application approval may be included in 
actual cost, as actual cost is described in Sec.  253.16.
    (j) First priority. The Program shall have first position lien 
priority on all primary project property pledged as collateral (or 
adequate substitute collateral), unless the Program, at the request of 
the applicant, expressly waives this requirement in writing.
    (k) No additional liens. All primary project property pledged as 
collateral, including any adequate substitute collateral, shall be free 
of additional liens, unless the Program, at the request of the 
applicant, expressly waives this requirement in writing.
    (l) General FFP credit standards apply. Unless explicitly stated 
otherwise in these rules, all Fisheries Finance Program direct lending 
is subject to the above general credit standards and requirements found 
in Sec. Sec.  253.12-253.30. The Program may adjust collateral, 
guarantee and other requirements to reflect individual credit risks.
    (m) Adverse legal proceedings. The Program, at its own discretion, 
may decline or hold in abeyance any loan approval or disbursement(s) to 
any applicant found to have outstanding lawsuits, citations, hearings, 
liabilities, appeals, sanctions or other pending actions whose negative 
outcome could significantly impact, in the opinion of the Program, the 
financial circumstances of the applicant.


Sec.  253.12  Credit application.

    (a) Applicant.
    (1) An applicant must be a U.S. citizen and be eligible to document 
a vessel in the coastwise trade: and
    (2) Only the legal title holder of project property, or its parent 
company (or the lessee of an appropriate long-term lease) may apply for 
a loan; and
    (3) An applicant and the majority of its principals must generally 
have the ability, experience, resources, character, reputation, and 
other qualifications the Program deems necessary for successfully 
operating, utilizing, or carrying out the project and protecting the 
Program's interest; and
    (4) Applicants should apply to the appropriate NMFS Regional 
Financial Services Branch to be considered.

[[Page 24561]]

    (b) Application fee. An application fee of 0.5 percent of the 
dollar amount of an application is due when the application is formally 
accepted. Upon submission, 50 percent of the application fee, known as 
the ``filing fee,'' is non-refundable; the remainder, known as the 
``commitment fee,'' may be refunded if the Program declines an 
application or an applicant withdraws its application before the 
Program issues an AIP letter, as described in Sec.  253.13(e). The 
Program will not issue an AIP letter if any of the application fee 
remains unpaid. No portion of the application fee shall be refunded 
once the Program issues an AIP letter.
    (c) False statement. A false statement on an application is grounds 
for denial or termination of funds, grounds for possible punishment by 
a fine or imprisonment as provided in 18 U.S.C. 1001 and an event of a 
security default.


Sec.  253.13  Initial investigation and approval.

    (a) The Program shall undertake a due diligence investigation of 
every application it receives to determine if, in the Program's sole 
judgment, the application is both:
    (1) Eligible for a loan because it meets applicable loan 
requirements; and
    (2) Qualified for a loan because the project is deemed an 
acceptable credit risk.
    (b) The Program will approve eligible and qualified applicants by 
evaluating the information obtained during the application and 
investigation process.
    (c) Among other investigations, applicants may be subject to a 
background check, fisheries violations check and credit review. 
Background checks are intended to reveal if any key individuals 
associated with the applicant have been convicted of or are presently 
facing criminal charges such as fraud, theft, perjury, or other matters 
which significantly reflect on the applicant's honesty or financial 
integrity.
    (d) The Program, at its own discretion, may decline or delay 
approval of any loans or disbursements to any applicant found to have 
outstanding citations, notices of violations, or other pending legal 
actions or unresolved claims.
    (e) The Program may place any terms and conditions on such 
approvals that the Program, in its sole discretion, deems necessary and 
appropriate.
    (f) Credit decision.
    (1) The Program shall issue an AIP letter to approved applicants, 
which shall describe the terms and conditions of the loan, including 
(but not limited to) loan amounts, maturities, additional collateral, 
repayment sources or guarantees. Such terms and conditions are at the 
Program's sole discretion and shall also be incorporated in security 
documents that the Program prepares. An applicant's non-acceptance of 
any terms and conditions may result in an applicant's disqualification.
    (2) Any application the Program deems ineligible or unqualified 
will be declined.


Sec.  253.14  Loan documents.

    (a) U.S. Note.
    (1) The U.S. Note will be in the form the Program prescribes.
    (2) The U.S. Note evidences the obligor's indebtedness to the 
United States.
    (i) For financing approved after October 11, 1996, the U.S. Note 
evidences the obligor's actual indebtedness to the U.S.; and
    (ii) For financing originating before October 11, 1996, that 
continues to be associated with a Guaranteed Note, the U.S. Note shall 
evidence the obligor's actual indebtedness to the U.S. upon the 
Program's payment of any or all of the sums due under the Guaranteed 
Note or otherwise disbursed on the obligor's behalf.
    (iii) The U.S. Note will, among other things, contain provisions to 
add to its principal balance all amounts the Program advances or 
incurs, including additional interest charges and costs incurred to 
protect its interest or accommodate the obligor.
    (3) The U.S. Note shall be assignable by the Program, at its sole 
discretion.
    (b) Security documents.
    (1) Each security document will be in the form the Program 
prescribes.
    (2) The Program will, at a minimum, require the pledge of adequate 
collateral, generally in the form of a security interest or mortgage 
against all property associated with a project or security as otherwise 
required by the Program.
    (3) The Program will require such other security as it deems 
necessary and appropriate, given the circumstances of each obligor and 
the project.
    (4) The security documents will, among other things, contain 
provisions to secure the repayment of all additional amounts the 
Program advances or incurs to protect its interest or accommodate the 
obligor, including additional interest charges and fees.


Sec.  253.15  Recourse against parties.

    (a) Form. Recourse by borrowers or guarantors may be by a repayment 
guarantee, irrevocable letter of credit, additional tangible or 
intangible collateral, or other form acceptable to the Program.
    (b) Principals accountable. The principal parties in interest, who 
ultimately stand most to benefit from the project, will ordinarily be 
held financially accountable for the project's performance. The Program 
may require recourse against:
    (1) All major shareholders of a closely-held corporate obligor;
    (2) The parent corporation of a subsidiary corporate obligor;
    (3) The related business entities of the obligor if the Program 
determines that the obligor lacks substantial pledged assets other than 
the project property or is otherwise lacking in any credit factor 
required to approve the application;
    (4) Any or all major limited partners;
    (5) Non-obligor spouses of applicants or obligors in community 
property states; and/or
    (6) Against any others it deems necessary to protect its interest.
    (c) Recourse against parties. Should the Program determine that a 
secondary means of repayment from other sources is necessary (including 
the net worth of parties other than the obligor), the Program may 
require secured or unsecured recourse against any such secondary 
repayment sources.
    (d) Recourse unavailable. Where appropriate recourse is 
unavailable, the conservatively projected net liquidating value of the 
obligor's assets (as such assets are pledged to the Program) must, in 
the Program's credit judgment, substantially exceed all projected 
Program exposure or other risks of loss.


Sec.  253.16  Actual cost.

    Actual cost shall be determined as follows:
    (a) The actual cost of a vessel shall be the sum of:
    (1) The total cost of the project depreciated on a straight-line 
basis, over the project property's useful life, using a 10-percent 
salvage value; and
    (2) The current market value of appurtenant limited access 
privileges or transferable limited access privileges vested in the name 
of the obligor, the subject vessel or their owners provided that such 
privileges are utilized by or aboard the subject vessel and will be 
pledged as collateral for the subject FFP financing.
    (b) The actual cost of a facility shall be the sum of:
    (1) The total cost of the project, not including land, depreciated 
on a straightline basis over the Project Property's useful life, using 
a 10-percent salvage value;
    (2) The current market value of the land that will be pledged as 
collateral for the subject FFP financing, provided that such land is 
utilized by the facility; and
    (3) The net present value of the payments due under a long term 
lease

[[Page 24562]]

of land or marine use rights, provided that they meet the following 
requirements:
    (i) The project property must be located at such leased space or 
directly use such marine rights;
    (ii) Such lease or marine use right must have a duration the 
Program deems sufficient; and
    (iii) The lease or marine use right must be assigned to the Program 
such that the Program may foreclose and transfer such lease to another 
party.
    (c) The actual cost of a transferable limited access privilege 
shall be determined as follows:
    (1) For financing the purchase of limited access privileges, the 
actual cost shall be the purchase cost.
    (2) For refinancing limited access privileges, the actual cost 
shall be the current market value.
    (d) The actual cost of any Project that includes any combination of 
items described in subsections (a), (b) or (c) of this section shall be 
the sum of such calculations.


Sec.  253.17  Insurance.

    (a) All insurable collateral property and other risks shall be 
continuously insured so long as any balance of principal or interest on 
a Program loan or guarantee remains outstanding.
    (b) Insurers must be acceptable to the Program.
    (c) Insurance must be in such forms and amounts and against such 
risks the Program deems necessary to protect the United States' 
interest.
    (d) Insurance must be endorsed to include the requirements the 
Program deems necessary and appropriate.
    (1) Normally and as appropriate, the Program will be named as an 
additional insured, mortgagee, or loss payee, for the amount of its 
interest; any waiver of this requirement must be in writing;
    (2) Cancellation will require adequate advance written notice;
    (3) The Program will be adequately protected against other 
insureds' breaches of policy warranties, negligence, omission, etc., in 
the case of marine insurance, vessel seaworthiness will be required;
    (4) The insured must provide coverage for any other risk or 
casualty the Program may require.


Sec.  253.18  Closing.

    (a) Approval in principle letters. Every closing will be in strict 
accordance with a final approval in principle letter.
    (b) Contracts. Promissory notes, security documents, and any other 
documents the Program may require will be on standard Program forms 
that may not be altered without Program written approval. The Program 
will ordinarily prepare all contracts, except certain pledges involving 
real property or other matters involving local law, which will be 
prepared by each obligor's attorney at the direction and approval of 
the Program.
    (c) Additional requirements. At its discretion the Program may 
require services from applicant's attorneys, other contractors or 
agents. Real property services required from an applicant's attorney or 
agent may include, but are not limited to: Title search, title 
insurance, mortgage and other document preparation, document execution 
and recording, escrow and disbursement, and legal opinions and other 
assurances. The Program will notify the applicant in advance if any 
such services are required of the applicant's attorneys, contractors or 
other agents. Applicants are responsible for all attorney's fees, as 
well as those of any other private contractor. Attorneys and other 
contractors must be satisfactory to the Program.
    (d) Closing schedules. The Program will not be liable for adverse 
interest-rate fluctuations, loss of commitments, or other consequences 
of an inability by any of the parties to meet the closing schedule.


Sec.  253.19  Dual-use CCF.

    The Program may require the pledge of a CCF account or annual 
deposits of some portion of the project property's net income into a 
dual-use CCF. A dual-use CCF provides the normal CCF tax-deferral 
benefits, but also gives the Program control of CCF withdrawals, 
recourse against CCF deposits, ensures an emergency refurbishing 
reserve (tax-deferred) for project property, and provides additional 
collateral.


Sec.  253.20  Fees.

    (a) Application fee. See Sec. Sec.  253.10 and 253.12(b), above.
    (b) Guarantee fee. For existing Guaranteed Loans, an annual 
guarantee fee will be due in advance and will be based on the 
guaranteed note's repayment provisions for the prospective year. The 
first annual guarantee fee was due at guarantee closing. Each 
subsequent guarantee fee is due and payable on the guarantee closing's 
anniversary date. Each is fully earned when due, and shall not 
subsequently be refunded for any reason.
    (c) Refinancing or assumption fee. The Program will assess a fee of 
one quarter of one (1) percent of the note to be refinanced or assumed. 
This fee is due upon application for refinancing or assumption of a 
guaranteed or direct loan. Upon submission, the fee shall be non-
refundable. The Program may waive a refinancing or assumption fee's 
payment when the refinancing or assumption's primary purpose will 
benefit the United States.
    (d) Where payable. Fees are payable by check to ``U.S. Department 
of Commerce/NOAA.'' Other than those collected at application or 
closing, fees are payable by mailing checks to the ``U.S. Department of 
Commerce, National Oceanic and Atmospheric Administration, National 
Marine Fisheries Service,'' to such address as the Program may 
designate. To ensure proper crediting, each check should include the 
official case number the Program assigns.


Sec.  253.21  Demand by Guaranteed Noteholder and payment.

    Every demand by the guaranteed noteholder must be delivered in 
writing to the Program and must include the noteholder's certified 
record of the date and amount of each payment made on the guaranteed 
note and the manner of its application. The only period during which a 
guaranteed noteholder can make demand for a payment default begins on 
the thirty-first day of the payment default and continues through the 
ninetieth day of a payment default. The noteholder must possess 
evidence of the demand's timely delivery.


Sec.  253.22  Program operating guidelines.

    The Program may issue policy and administrative guidelines, as the 
need arises.


Sec.  253.23  Default and liquidation.

    Upon default under the terms of any note, guarantee, security 
agreement, mortgage, or other security document, the Program shall take 
remedial actions including but not limited to, where appropriate, 
retaking or arrest of collateral, foreclosure, restructuring, 
debarment, referral for debt collection, or liquidation as it deems 
best able to protect the U.S. Government's interest.


Sec.  253.24  Enforcement violations and adverse actions.

    (a) Compliance with applicable law. All applicants and Program 
participants shall comply with applicable law.
    (b) Applicant disqualification.
    (1) Any issuance of any citation or Notice of Violation and 
Assessment by NMFS enforcement or other enforcement authority may 
constitute grounds for the Program to:
    (1) Delay application or approval processing;
    (2) Delay loan closing;
    (3) Delay disbursement of loan proceeds;

[[Page 24563]]

    (4) Disqualify an applicant or obligor; or
    (5) Declare default.
    (2) The Program will not approve loans or disburse funds to any 
applicant found to have an outstanding, final and unappealable 
fisheries fine or other unresolved penalty until either: (i) Such fine 
is paid or penalty has been resolved; or (ii) the applicant enters into 
an agreement to pay the penalty and makes all payments or installments 
as they are due. Failure to pay or resolve any such fine or penalty in 
a reasonable period of time will result in the applicant's 
disqualification.
    (c) Foreclosure in addition to other penalties. In the event that a 
person with an outstanding balance on a Program loan or guarantee 
violates any ownership, lease, use, or other provisions of applicable 
law, such person may be subject to foreclosure of property, in addition 
to any fines, sanctions, or other penalties.


Sec.  253.25  Other administrative requirements.

    (a) Debt Collection Act. In accordance with the provisions of the 
Debt Collection Improvement Act of 1996, a person may not obtain any 
Federal financial assistance in the form of a loan (other than a 
disaster loan) or loan guarantee if the person has an outstanding debt 
(other than a debt under the Internal Revenue Code of 1986) with any 
Federal agency which is in a delinquent status, as determined under 
standards prescribed by the Secretary of the Treasury.
    (b) Certifications. Applicants must submit a completed Form CD-511, 
``Certifications Regarding Debarment, Suspension and Other 
Responsibility Matters; Drug-Free Workplace Requirements and 
Lobbying,'' or its equivalent or successor form, if any.
    (c) Taxpayer identification. An applicant classified for tax 
purposes as an individual, limited liability company, partnership, 
proprietorship, corporation, or legal entity is required to submit 
along with the application a taxpayer identification number (TIN) 
(social security number, employer identification number as applicable, 
or registered foreign organization number). Recipients who either fail 
to provide their TIN or provide an incorrect TIN may have application 
processing or funding suspended until the requirement is met.
    (d) Inspector General inquiry. An audit of a Program loan may be 
conducted at any time. Auditors, selected at the discretion of the 
Program or other agency of the United States, shall have access to any 
and all books, documents, papers and records of the obligor or any 
other party to a financing that the auditor(s) deem(s) pertinent, 
whether written, printed, recorded, produced or reproduced by any 
mechanical, magnetic or other process or medium.
    (e) Paperwork Reduction Act. The application requirements contained 
in these rules have been approved under OMB control number 0648-0012. 
The applications for the halibut/sablefish QS crew member eligibility 
certificate have been approved under OMB control number 0648-0272. 
Notwithstanding any other provisions of law, no person is required to 
respond to, nor shall any person be subject to a penalty for failure to 
comply with, a collection of information subject to the requirements of 
the Paperwork Reduction Act unless that collection of information 
displays a currently valid OMB control number.


Sec.  253.26  Traditional loans.

    (a) Eligible projects. Financing or refinancing up to 80 percent of 
a project's actual cost shall be available to any citizen who is 
determined to be eligible and qualified under the Act and these rules, 
except--
    (1) The Program will not finance the cost of new vessel 
construction.
    (2) The Program will not finance a vessel refurbishing project that 
materially increases an existing vessel's harvesting capacity.
    (b) Financing or refinancing.
    (1) Projects, other than those specified in paragraphs (a)(1) and 
(a)(2) of this section, may be financed, as well as refinanced.
    (2) Notwithstanding paragraph (a)(1) of this section, the Program 
may refinance the construction cost of a vessel whose construction cost 
has already been financed (or otherwise paid) prior to the submission 
of a loan application.
    (3) Notwithstanding paragraph (a)(2) of this section, the Program 
may refinance the refurbishing cost of a vessel whose initial 
refurbishing cost has already been financed (or otherwise paid) prior 
to the submission of a loan application.
    (4) The Program may finance or refinance the purchase or 
refurbishment of any vessel or facility for which the Secretary has
    (i) Accelerated and/or paid outstanding debts or obligations,
    (ii) Acquired, or
    (iii) Sold at foreclosure.
    (c) Existing vessels and facilities. The Program may finance the 
purchase of an existing vessel or existing fishery facility if such 
vessel or facility will be refurbished in the United States and will be 
used in the fishing industry.
    (d) Fisheries modernization. Notwithstanding any of this part, the 
Program may finance or refinance any
    (1) Activities that assist in the transition to reduced fishing 
capacity; or
    (2) Technologies or upgrades designed to
    (i) Improve collection and reporting of fishery-dependent data,
    (ii) Reduce bycatch,
    (iii) Improve selectivity
    (iv) Reduce adverse impacts of fishing gear, or
    (v) To improve safety.
    (e) Guaranty transition. Upon application by the obligor, any 
guaranteed loans originated prior to October 11, 1996, may be 
refinanced as direct loans, regardless of the original purpose of the 
guaranteed loan.
    (f) Maturity. Maturity may not exceed 25 years, but shall not 
exceed the project's property useful life. The Program, at its sole 
discretion, may set a shorter maturity period.
    (g) Credit standards. Traditional loans are subject to all 
Fisheries Finance Program general credit standards and requirements. 
Collateral, guarantee and other requirements may be adjusted in 
accordance with the Program's assessment of individual credit risks.


Sec.  253.27  IFQ financing.

    The Program may finance or refinance the project cost of 
purchasing, including the reimbursement of obligors for expenditures 
previously made for purchasing, individual fishing quotas in accordance 
with the applicable sections of the Magnuson-Stevens Fishery 
Conservation and Management Act or any other statute.


Sec.  253.28  Halibut sablefish IFQ loans.

    (a) Specific definitions. For the purposes of this section, the 
following definitions apply:
    (1) Entry-level fishermen means fishermen who do not own any IFQ in 
the year they apply for a loan.
    (2) Fishermen who fish from small vessels means fishermen wishing 
to purchase IFQ for use on Category B, Category C, or Category D 
vessels, but do not own, in whole or in part, any Category A or 
Category B vessels, as such vessels are defined in 50 CFR 679.40(a)(5) 
of this title.
    (3) Halibut sablefish quota share means a halibut or sablefish 
permit, the face amount of which is used as the basis for the annual 
calculation of a person's halibut or sablefish IFQ, also abbreviated as 
``HSQS'' or ``halibut/sablefish QS.''
    (4) Halibut/Sablefish IFQ means the annual catch limit of halibut 
or sablefish that may be harvested by a person who

[[Page 24564]]

is lawfully allocated halibut or sablefish quota share, a harvest 
privilege for a specific portion of the total allowable catch of 
halibut or sablefish.
    (b) Entry level fishermen. The Program may finance up to 80 percent 
of the cost of purchasing HSQS by an entry level fisherman who:
    (1) Does not own any halibut/sablefish QS during the origination 
year;
    (2) Applies for a loan to purchase a quantity of halibut/sablefish 
QS that is not greater than the equivalent of 8,000 lb. (3,628.7 kg) of 
IFQ during the origination year;
    (3) Possesses the appropriate transfer eligibility documentation 
duly issued by RAM for HSQS;
    (4) Intends to be present aboard the vessel, as may be required by 
applicable regulations; and
    (5) Meets all other Program eligibility, qualification, lending and 
credit requirements.
    (c) Fishermen fishing from small vessels. The Program may finance 
up to 80 percent of the cost of purchasing HSQS by a fisherman who 
fishes from a small vessel provided that any such fisherman shall:
    (1) Apply for a loan to purchase halibut or sablefish QS for use on 
vessel Categories B, C, or D, as defined under 50 CFR 679.40(a)(5) of 
this title;
    (2) Does not own an aggregate quantity of halibut/sablefish QS 
(including the loan QS) is not more than the equivalent of 50,000 lb. 
(22,679.6 kg) of IFQ during the origination year;
    (3) Does not own, in whole or in part, directly or indirectly 
(including through stock or other ownership interest) any vessel of the 
type that would have been assigned Category A or Category B HSQS under 
50 CFR 679.40(a)(5);
    (4) Possesses the appropriate transfer eligibility documentation 
duly issued by the RAM for HSQS;
    (5) Intends to be present aboard the vessel, as may be required by 
applicable regulations, as IFQ associated with halibut/sablefish QS 
financed by the loan is harvested; and
    (6) Shall meet all other Program eligibility, qualification, 
lending and credit requirements.
    (d) Refinancing.
    (1) The Program may refinance any existing debts associated with 
HSQS an applicant currently holds, provided that--
    (i) The HSQS being refinanced would have been eligible for Program 
financing at the time the applicant purchased it, and
    (ii) The applicant meets the Program's applicable lending 
requirements.
    (2) The refinancing is in an amount up to 80 percent of HSQS' 
current market value, and subject to the limitation that the Program 
will not disburse any amount that exceeds the outstanding principal 
balance, plus accrued interest (if any), of the existing HSQS debt 
being refinanced.
    (3) In the event that the current market value of HSQS and 
principal loan balance do not meet the 80 percent requirement in 
paragraph (d)(2) of this section, applicants seeking refinancing may be 
required to provide additional down payment.
    (e) Maturity. Loan maturity may not exceed 25 years, but may be 
shorter depending on credit and other considerations.
    (f) Repayment. Repayment will be by equal quarterly installments of 
principal and interest.
    (g) Security. Although quota share(s) will be the primary 
collateral for a HSQS loan, the Program may require additional security 
pledges to maintain the priority of the Program's security interest. 
The Program, at its option, may also require all parties with 
significant ownership interests to personally guarantee loan repayment 
for any applicant that is a corporation, partnership, or other entity. 
Subject to the Program's credit risk determination, some projects may 
require additional security, collateral, or credit enhancement.
    (h) Crew member transfer eligibility certification. The Program 
will accept RAM certification as proof that applicants are eligible to 
hold HSQS. The application of any person determined by RAM to be unable 
to receive such certification will be declined. Applicants who fail to 
obtain appropriate transfer eligibility certification within 45 working 
days of the date of application may lose their processing priority.
    (i) Program credit standards. HSQS loans, regardless of purpose, 
are subject to all Program general credit standards and requirements. 
Collateral, guarantee and other requirements may be adjusted to 
individual credit risks.


Sec.  253.29  CDQ loans.

    (a) FFP actions. The Program may finance or refinance up to 80 
percent of a project's actual cost.
    (b) Eligible projects. Eligible projects include the purchase of 
all or part of ownership interests in fishing or processing vessels, 
shoreside fish processing facilities, permits, quota, and cooperative 
rights in any of the Bering Sea and Aleutian Islands fisheries.
    (c) Eligible entities. The following communities, in accordance 
with applicable law and regulations are eligible to participate in the 
loan program.
    (1) The villages of Akutan, Atka, False Pass, Nelson Lagoon, 
Nikolski, and Saint George through the Aleutian Pribilof Island 
Community Development Association.
    (2) The villages of Aleknagik, Clark's Point, Dillingham, Egegik, 
Ekuk, Ekwok, King Salmon/Savonoski, Levelock, Manokotak, Naknek, Pilot 
Point, Port Heiden, Portage Creek, South Naknek, Togiak, Twin Hills, 
and Ugashik through the Bristol Bay Economic Development Corporation.
    (3) The village of Saint Paul through the Central Bering Sea 
Fishermen's Association.
    (4) The villages of Chefornak, Chevak, Eek, Goodnews Bay, Hooper 
Bay, Kipnuk, Kongiganak, Kwigillingok, Mekoryuk, Napakiak, Napaskiak, 
Newtok, Nightmute, Oscarville, Platinum, Quinhagak, Scammon Bay, 
Toksook Bay, Tuntutuliak, and Tununak through the Coastal Villages 
Region Fund.
    (5) The villages of Brevig Mission, Diomede, Elim, Gambell, 
Golovin, Koyuk, Nome, Saint Michael, Savoonga, Shaktoolik, Stebbins, 
Teller, Unalakleet, Wales, and White Mountain through the Norton Sound 
Economic Development Corporation.
    (6) The villages of Alakanuk, Emmonak, Grayling, Kotlik, Mountain 
Village, and Nunam Iqua through the Yukon Delta Fisheries Development 
Association.
    (7) Any new groups established by applicable law.
    (d) Loan terms.
    (1) CDQ loans may have terms up to thirty years, but shall not 
exceed the project's property useful life. The Program, at its sole 
discretion, may set a shorter maturity period.
    (2) CDQ loans are subject to all Fisheries Finance Program general 
credit standards and requirements. Collateral, guarantee and other 
requirements may be adjusted to individual credit risks.


Sec.  253.30  Crab IFQ loans.

    (a) Specific definitions. For the purposes of this section, the 
following definitions apply:
    (1) Crab means those crab species managed under the Fishery 
Management Plan for Bering Sea/Aleutian Island (BSAI) King and Tanner 
Crab.
    (2) Crab FMP means the Fishery Management Plan for BSAI King and 
Tanner Crab.
    (3) Crab quota share means a BSAI King and Tanner Crab permit, the 
base amount of which is used as a basis for

[[Page 24565]]

the annual calculation of a person's Crab IFQ, also abbreviated as 
``Crab QS.''
    (b) Crab captains or crewmen. The Program may finance up to 80 
percent of the cost of purchasing Crab QS by a citizen:
    (1) Who is or was:
    (i) A captain of a crab fishing vessel, or
    (ii) A crew member of a crab fishing vessel;
    (2) Who has been issued the appropriate documentation of 
eligibility by RAM;
    (3) Whose aggregate holdings of QS will not exceed the aggregate 
limit on Crab QS holdings that may be in effect in the Crab FMP 
implementing regulations or applicable statutes in effect at the time 
of loan closing; and will not hold either individually or collectively, 
based on the initial QS pool, as published in 50 CFR part 680, Table 8;
    (4) Who, at the time of initial application, meets all other 
applicable eligibility requirements to fish for crab or hold Crab QS 
contained in the Crab FMP implementing regulations or applicable 
statutes in effect at the time of loan closing.
    (c) Refinancing.
    (1) The Program may refinance any existing debts associated with 
Crab QS that an applicant currently holds, provided that:
    (i) The Crab QS being refinanced would have been eligible for 
Program financing at the time the applicant purchased it;
    (ii) The applicant meets the Program's applicable lending 
requirements; and
    (iii) The applicant would meet the requirements found in the Crab 
FMP implementing regulations at the time any such refinancing loan 
would close.
    (2) The Program may refinance an amount up to 80 percent of Crab 
QS's current market value, subject to the limitation that the Program 
will not disburse any amount that exceeds the outstanding principal 
balance, plus accrued interest (if any), of the existing Crab QS debt 
being refinanced.
    (3) In the event that the current market value of Crab QS and 
current principal balance do not meet the 80 percent requirement in 
paragraph (c)(2) of this section, applicants seeking refinancing may be 
required to provide additional down payment.
    (d) Maturity. Loan maturity may not exceed 25 years, but may be 
shorter depending on credit and other considerations.
    (e) Repayment. Repayment schedules will be set by the loan 
documents.
    (f) Security. Although the quota share will be the primary 
collateral for a Crab QS loan, the Program may require additional 
security pledges to maintain the priority of the Program's security 
interest. The Program, at its option, may also require all parties with 
significant ownership interests to personally guarantee loan repayment 
for any applicant that is a corporation, partnership, or other entity. 
Subject to the Program's credit risk determination, some projects may 
require additional security, collateral, or credit enhancement.
    (g) Crew member transfer eligibility certification. The Program 
will accept RAM transfer eligibility certification as proof that 
applicants are eligible to hold Crab QS. The application of any person 
determined by RAM to be unable to receive such certification will be 
declined. Applicants who fail to obtain appropriate transfer 
eligibility certification within 45 working days of the date of 
application may lose their processing priority.
    (h) Crab Quota Share Ownership Limitation. A program obligor must 
comply with all applicable maximum amounts, as may be established by 
NMFS regulations, policy or North Pacific Fishery Management Council 
action.
    (i) Program credit standards. Crab QS loans are subject to all 
Program general credit standards and requirements. Collateral, 
guarantee and other requirements may be adjusted to individual credit 
risks.

Subpart C--Interjurisdictional Fisheries


Sec.  253.50  Definitions.

    The terms used in this subpart have the following meanings:
    Act means the Interjurisdictional Fisheries Act of 1986, Public Law 
99-659 (Title III).
    Adopt means to implement an interstate fishery management plan by 
State action or regulation.
    Commercial fishery failure means a serious disruption of a fishery 
resource affecting present or future productivity due to natural or 
undetermined causes. It does not include either:
    (1) The inability to harvest or sell raw fish or manufactured and 
processed fishery merchandise; or
    (2) Compensation for economic loss suffered by any segment of the 
fishing industry as the result of a resource disaster.
    Enforcement agreement means a written agreement, signed and dated, 
between a state agency and either the Secretary of the Interior or 
Secretary of Commerce, or both, to enforce Federal and state laws 
pertaining to the protection of interjurisdictional fishery resources.
    Federal fishery management plan means a plan developed and approved 
under the Magnuson Fishery Conservation and Management Act (16 U.S.C. 
1801 et seq.).
    Fisheries management means all activities concerned with 
conservation, restoration, enhancement, or utilization of fisheries 
resources, including research, data collection and analysis, 
monitoring, assessment, information dissemination, regulation, and 
enforcement.
    Fishery resource means finfish, mollusks, and crustaceans, and any 
form of marine or Great Lakes animal or plant life, including habitat, 
other than marine mammals and birds.
    Interjurisdictional fishery resource means:
    (1) A fishery resource for which a fishery occurs in waters under 
the jurisdiction of one or more states and the U.S. Exclusive Economic 
Zone; or
    (2) A fishery resource for which an interstate or a Federal fishery 
management plan exists; or
    (3) A fishery resource which migrates between the waters under the 
jurisdiction of two or more States bordering on the Great Lakes.
    Interstate Commission means a commission or other administrative 
body established by an interstate compact.
    Interstate compact means a compact that has been entered into by 
two or more states, established for purposes of conserving and managing 
fishery resources throughout their range, and consented to and approved 
by Congress.
    Interstate Fisheries Research Program means research conducted by 
two or more state agencies under a formal interstate agreement.
    Interstate fishery management plan means a plan for managing a 
fishery resource developed and adopted by the member states of an 
Interstate Marine Fisheries Commission, and contains information 
regarding the status of the fishery resource and fisheries, and 
recommends actions to be taken by the States to conserve and manage the 
fishery resource.
    Landed means the first point of offloading fishery resources.
    NMFS Regional Director means the Director of any one of the five 
National Marine Fisheries Service regions.
    Project means an undertaking or a proposal for research in support 
of management of an interjurisdictional fishery resource or an 
interstate fishery management plan.

[[Page 24566]]

    Research means work or investigative study, designed to acquire 
knowledge of fisheries resources and their habitat.
    Secretary means the Secretary of Commerce or his/her designee.
    State means each of the several states, the District of Columbia, 
the Commonwealth of Puerto Rico, American Samoa, the Virgin Islands, 
Guam, or the Commonwealth of the Northern Mariana Islands.
    State agency means any department, agency, commission, or official 
of a state authorized under the laws of the State to regulate 
commercial fisheries or enforce laws relating to commercial fisheries.
    Value means the monetary worth of fishery resources used in 
developing the apportionment formula, which is equal to the price paid 
at the first point of landing.
    Volume means the weight of the fishery resource as landed, at the 
first point of landing.


Sec.  253.51  Apportionment.

    (a) Apportionment formula. The amount of funds apportioned to each 
state is to be determined by the Secretary as the ratio which the 
equally weighted average of the volume and value of fishery resources 
harvested by domestic commercial fishermen and landed within such state 
during the 3 most recent calendar years for which data satisfactory to 
the Secretary are available bears to the total equally weighted average 
of the volume and value of all fishery resources harvested by domestic 
commercial fishermen and landed within all of the states during those 
calendar years.
    (1) The equally weighted average value is determined by the 
following formula:
[GRAPHIC] [TIFF OMITTED] TP05MY10.000

[GRAPHIC] [TIFF OMITTED] TP05MY10.001

[GRAPHIC] [TIFF OMITTED] TP05MY10.002

    (2) Upon appropriation of funds by Congress, the Secretary will 
take the following actions:
    (i) Determine each state's share according to the apportionment 
formula.
    (ii) Certify the funds to the respective NMFS Regional Director.
    (iii) Instruct NMFS Regional Directors to promptly notify states of 
funds' availability.
    (b) No state, under the apportionment formula in paragraph (a) of 
this section, that has a ratio of one-third of 1 percent or higher may 
receive an apportionment for any fiscal year that is less than 1 
percent of the total amount of funds available for that fiscal year.
    (c) If a State's ratio under the apportionment formula in paragraph 
(b) of this section is less than one-third of 1 percent, that state may 
receive funding if the state:
    (1) Is signatory to an interstate fishery compact;
    (2) Has entered into an enforcement agreement with the Secretary 
and/or the Secretary of the Interior for a fishery that is managed 
under an interstate fishery management plan;
    (3) Borders one or more of the Great Lakes;
    (4) Has entered into an interstate cooperative fishery management 
agreement and has in effect an interstate fisheries management plan or 
an interstate fisheries research Program; or
    (5) Has adopted a Federal fishery management plan for an 
interjurisdictional fishery resource.
    (d) Any state that has a ratio of less than one-third of 1 percent 
and meets any of the requirements set forth in paragraphs (c)(1) 
through (5) of this section may receive an apportionment for any fiscal 
year that is not less than 0.5 percent of the total amount of funds 
available for apportionment for such fiscal year.
    (e) No state may receive an apportionment under this section for 
any fiscal year that is more than 6 percent of the total amount of 
funds available for apportionment for such fiscal year.
    (f) Unused apportionments. Any part of an apportionment for any 
fiscal year to any state:
    (1) That is not obligated during that year;
    (2) With respect to which the state notifies the Secretary that it 
does not wish to receive that part; or
    (3) That is returned to the Secretary by the state, may not be 
considered to be appropriated to that state and must be added to such 
funds as are appropriated for the next fiscal year. Any notification or 
return of funds by a state referred to in this section is irrevocable.


Sec.  253.52  State projects.

    (a) General--
    (1) Designation of state agency. The Governor of each state shall 
notify the Secretary of which agency of the state government is 
authorized under its laws to regulate commercial fisheries and is, 
therefore, designated receive financial assistance awards. An official 
of such agency shall certify which official(s) is authorized in 
accordance with state law to commit the state to participation under 
the Act, to sign project documents, and to receive payments.
    (2) States that choose to submit proposals in any fiscal year must 
so notify the NMFS Regional Director before the end of the third 
quarter of that fiscal year.
    (3) Any state may, through its state agency, submit to the NMFS 
Regional Director a completed NOAA Grants and Cooperative Agreement 
Application Package with its proposal for a project, which may be 
multiyear. Proposals must describe the full scope of work, 
specifications, and cost estimates for such project.
    (4) States may submit a proposal for a project through, and request 
payment to be made to, an Interstate Fisheries Commission. Any payment 
so made shall be charged against the apportionment of the appropriate 
state(s). Submitting a project through one of the Commissions does not 
remove the matching funds requirement for any state, as provided in 
paragraph (c) of this section.
    (b) Evaluation of projects. The Secretary, before approving any 
proposal for a project, will evaluate the proposal as to its 
applicability, in accordance with 16 U.S.C. 4104(a)(2).
    (c) State matching requirements. The Federal share of the costs of 
any project conducted under this subpart, including a project submitted 
through an Interstate Commission, cannot exceed 75 percent of the total 
estimated cost of the project, unless:
    (1) The state has adopted an interstate fishery management plan for 
the fishery resource to which the project applies; or
    (2) The state has adopted fishery regulations that the Secretary 
has determined are consistent with any Federal fishery management plan 
for the species to which the project applies, in which case the Federal 
share cannot

[[Page 24567]]

exceed 90 percent of the total estimated cost of the project.
    (d) Financial assistance award. If the Secretary approves or 
disapproves a proposal for a project, he or she will promptly give 
written notification, including, if disapproved, a detailed explanation 
of the reason(s) for the disapproval.
    (e) Restrictions.
    (1) The total cost of all items included for engineering, planning, 
inspection, and unforeseen contingencies in connection with any works 
to be constructed as part of such a proposed project shall not exceed 
10 percent of the total cost of such works, and shall be paid by the 
state as a part of its contribution to the total cost of the project.
    (2) The expenditure of funds under this subpart may be applied only 
to projects for which a proposal has been evaluated under paragraph (b) 
of this section and approved by the Secretary, except that up to 
$25,000 each fiscal year may be awarded to a state out of the state's 
regular apportionment to carry out an ``enforcement agreement.'' An 
enforcement agreement does not require state matching funds.
    (f) Prosecution of work. All work must be performed in accordance 
with applicable state laws or regulations, except when such laws or 
regulations are in conflict with Federal laws or regulations such that 
the Federal law or regulation prevails.


Sec.  263.53  Other funds.

    (a) Funds for disaster assistance.
    (1) The Secretary shall retain sole authority in distributing any 
disaster assistance funds made available under section 308(b) of the 
Act. The Secretary may distribute these funds after he or she has made 
a thorough evaluation of the scientific information submitted, and has 
determined that a commercial fishery failure of a fishery resource 
arising from natural or undetermined causes has occurred. Funds may 
only be used to restore the resource affected by the disaster, and only 
by existing methods and technology. Any fishery resource used in 
computing the states' amount under the apportionment formula in Sec.  
253.601(a) will qualify for funding under this section. The Federal 
share of the cost of any activity conducted under the disaster 
provision of the Act shall be limited to 75 percent of the total cost.
    (2) In addition, pursuant to section 308(d) of the Act, the 
Secretary is authorized to award grants to persons engaged in 
commercial fisheries, for uninsured losses determined by the Secretary 
to have been suffered as a direct result of a fishery resource 
disaster. Funds may be distributed by the Secretary only after notice 
and opportunity for public comment of the appropriate limitations, 
terms, and conditions for awarding assistance under this section. 
Assistance provided under this section is limited to 75 percent of an 
uninsured loss to the extent that such losses have not been compensated 
by other Federal or State Programs.
    (b) Funds for interstate commissions. Funds authorized to support 
the efforts of the three chartered Interstate Marine Fisheries 
Commissions to develop and maintain interstate fishery management plans 
for interjurisdictional fisheries will be divided equally among the 
Commissions.


Sec.  253.54  Administrative requirements.

    Federal assistance awards made as a result of this Act are subject 
to all Federal laws, Executive Orders, Office of Management and Budget 
Circulars as incorporated by the award; Department of Commerce and NOAA 
regulations; policies and procedures applicable to Federal financial 
assistance awards; and terms and conditions of the awards.

[FR Doc. 2010-10270 Filed 5-4-10; 8:45 am]
BILLING CODE 3510-22-P


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