Source: https://www.federalregister.gov/documents/2000/12/07/00-31094/citizenship-standards-for-vessel-ownership-and-financing-american-fisheries-act
Timestamp: 2017-10-21 09:24:58
Document Index: 166726033

Matched Legal Cases: ['§\u200967', 'art 356', '§\u200967', '§\u200967', '§\u200967', '§\u200967', '§\u200967', '§\u200967', 'art 356', '§\u200967', '§\u200967', '§\u200967', '§\u200967', '§\u200967', '§\u200967', '§\u200967', '§\u200967', '§\u200967']

A Rule by the Transportation Department and the Coast Guard on 12/07/2000
This final rule becomes effective on October 1, 2001.
76572-76577 (6 pages)
https://www.federalregister.gov/d/00-31094 https://www.federalregister.gov/d/00-31094
The Coast Guard amends citizenship requirements for fishing vessels of less than 100 feet in length that are eligible for a fishery endorsement, by increasing the percentage of interest in a vessel required to be owned and controlled by U.S. citizens in corporations. The percentage increased is from more than 50 percent to at least 75 percent. We add provisions making fishery endorsements of documented fishing vessels chartered or leased to a person who is not a citizen or to an entity which is ineligible to own a documented fishing vessel invalid. We also prohibit fishery endorsement for a fishing vessel mortgaged to a trustee if the mortgage interest is issued, assigned, transferred, or held in trust for a person not eligible to own a documented fishing vessel, even if the trustee is eligible to own a documented fishing vessel.
Comments and material received from the public, as well as documents mentioned in this preamble as being available in the docket, are part of docket USCG-1999-6095 and are available for inspection or copying at the Docket Management Facility, U.S. Department of Transportation, room PL-401, 400 Seventh Street SW., Washington, DC, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. You may also find this docket on the Internet at http://dms.dot.gov.
If you have questions on this rule, call Patricia J. Williams, Coast Guard, telephone 304-271-2400. If you have questions on viewing the docket, call Dorothy Beard, Chief, Dockets, Department of Transportation, telephone 202-366-9329.
On July 27, 2000, we published a notice of proposed rulemaking entitled Citizenship Standards for Vessel Ownership and Financing; American Fisheries Act [USCG-1999-6095] in the Federal Register (65 FR 46137). No public hearing was requested and none was held.
For reasons and purposes as discussed in the NPRM the Coast Guard amends its fishery endorsement regulations as mandated by the 105th U.S. Congress (Pub. L. 105-277) outlining fishery endorsement eligibility for fishing vessels less than 100 feet in length. The American Fisheries Act (AFA) requires a real, effective, and enforceable U.S. ownership threshold for U.S.-flag fishing vessels. Under this Act, U.S. citizens must own and control at least 75 percent of the ownership interest in any U.S.-flag fishing vessel. The Act is intended to ensure that vessels with a fishery endorsement are truly controlled by citizens of the United States. The Act also increases the penalties for fishery endorsement violations and is intended to discourage willful noncompliance with the new requirements.
The Coast Guard received 12 comments from two respondents addressing the proposed changes to the citizenship requirements for U.S.-flag fishing vessels with a fishery endorsement. Each respondent highlighted several different items within the proposed rule.
One comment felt that the proposed change to § 67.11 goes too far by eliminating the fishing vessel exemption on selling, mortgaging, leasing, chartering, delivering, or otherwise transferring of the vessel to a non-U.S. citizen without the prior approval of the Maritime Administration. The Coast Guard agrees. Our initial intent was to ensure full compliance with the American Fisheries Act and to ensure there is no confusion among the regulated community. By removing paragraphs (b)(1) and (b)(3) we inadvertently exceeded the scope of the mandate. We have added a paragraph (c) to this section that clarifies vessels less than 100 feet must comply with the Fishery Endorsement requirements of the part, and vessels 100 feet and greater must comply with the requirements found in 46 CFR part 356.
Both respondents stated our proposed restrictions on chartering should apply only to fish harvesting vessels, and not to fish processing or fish tender vessels. We have reviewed the issue, as well as the regulations applicable to larger vessels, implemented by the Maritime Administration (MARAD), the agency with the authority of administering the AFA on vessels greater than or equal to 100 feet in length. We have determined that the regulations regarding chartering of vessels less than 100 feet should be the same as those regarding larger vessels. Thus, we have added language to § 67.21(d)(3) that will not restrict time or voyage charters to Non-Citizens of dedicated Fish Processing or Fish Tender Vessels. This change will bring the regulations for vessels less than 100 feet into symmetry with the regulations for larger vessels, while still invalidating fishery endorsements whenever a fish harvesting vessel is chartered to a Non-Citizen. Bareboat charters of any fishing industry vessel to Start Printed Page 76573Non-Citizens will also invalidate the vessel's fishery endorsement.
Both respondents questioned the efficiency of having the Commandant review and approve every loan by a Non-Citizen that is secured by a mortgage, regardless of vessel length. Both suggested that the Coast Guard accept arrangements approved by MARAD for vessels greater than or equal to 100 feet. This has always been the intent of the Coast Guard. We have added to 46 CFR 67.21(f) in order to clarify this intent and prevent confusion among the regulated industry. Additionally, we are adding language to that same section that will allow owners of vessels less than 100 feet to presume Commandant approval of standard loan and mortgage agreements from Non-Citizen lenders, that have received general approval under MARAD's regulations. For those vessels under 100 feet that are entering into non-standard loan and mortgage agreements with Non-Citizen lenders, Commandant approval will proceed on a case-by-case basis.
One comment raised a concern that redefining “control” in § 67.31 “Stock or equity interest requirements” would unnecessarily subject non-fishing industry vessels to the more stringent requirements included in the AFA. The Coast Guard agrees with this comment. In order to ensure the AFA definition of control is not applied to non-fishing industry vessels, we have split the definition into §§ 67.31(b) and (c), and moved the current § 67.31(c) to § 67.31(d).
Both respondents noted that certain larger vessels that were “grandfathered” by the AFA have been given a 15-day period to correct an invalid fishery endorsement. MARAD spelled out the procedures for such a correction in 46 CFR 356.47(b). We did not address the issue in our proposed regulations because we no longer have authority over these vessels. However, it has always been our intention to accept a determination by MARAD that a correction had occurred, and thus continue to recognize a vessel's fishery endorsement. Additionally, the Coast Guard plans to work closely with the Maritime Administration to ensure that notification of a vessel's fishery endorsement ineligibility takes place in a timely and uniform manner.
Both respondents noted that our proposed changes did not include reference to the five vessels specifically granted exemptions by Congress in section 203(g) of the AFA. These vessels were not included in our proposal because they are all over 100 feet in length, and thus outside of our authority. MARAD listed these vessels in 46 CFR 356.51(c) as exempt from the AFA requirements. All are eligible for documentation.
One comment expressed confusion regarding the application procedures outlined in § 67.141. The regulation requires that all vessels, regardless of length, submit certain materials for documentation. This includes the citizenship oath on the CG-1258 documentation application form. Vessels greater than or equal to 100 feet in length must also meet the requirements MARAD has established in 46 CFR part 356, subpart C, including the more extensive citizenship affidavit. Vessels not under MARAD's jurisdiction (less than 100 feet in length) do not need to complete the more extensive form.
One comment noted, as a technicality, that the term “Exclusive Economic Zone” was not being used consistently in our proposed rule. We have made the necessary changes in §§ 67.142(b)(3) and 67.142(c) to ensure consistent usage.
The Coast Guard made two additional changes from the proposed language. In § 67.350, we reworded paragraph (b)(1) in order to clarify the evidence needed to obtain a petition for an exemption from the citizenship requirements. This language change does not affect the substance of the rule; it clarifies that the required evidence must show the ownership of the vessel as of October 1, 2001, whether you are submitting your petition before, on, or after that date.
In § 67.21 we re-designated proposed paragraph (e) as paragraph (f), and added a new paragraph (e) exempting vessels engaged in the fisheries in the exclusive economic zone (EEZ) under the authority of the Western Pacific Fishery Management Council, and certain vessels operating under the authority of the South Pacific Regional Fisheries Treaty, as set forth in the American Fisheries Act. We did not include this provision in the NPRM because a review of vessels under the authority of the Council and Treaty showed all such vessels to be greater than 100 feet and therefore outside our authority. We now include this provision to ensure full compliance with the American Fisheries Act and to ensure there is no confusion among the regulated community.
This rule is not a “significant regulatory action” under section 3(f) of Executive Order 12866 and does not require an assessment of potential costs and benefits under section 6(a)(3) of that Order. The Office of Management and Budget has not reviewed it under that Order. It is not “significant” under the regulatory policies and procedures of the Department of Transportation (DOT)(44 FR 11040, February 26, 1979). We expect the economic impact of this rule to be so minimal that a full Regulatory Evaluation under paragraph 10e of the regulatory policies and procedures of DOT is unnecessary.
The Marine Safety Management System (MSMS) shows that about 36,000 vessels have fishery endorsements. This regulation impacts documented vessels with fishery endorsements that are less than 100 feet. About 35,500 vessels with fishery endorsements are less than 100 feet. Of these, we researched a random sample of 1,010 vessels in order to achieve a 95 percent confidence level. We found that the change to minimum U.S. ownership requirements from “more than 50 percent” to “at least 75 percent” affects one of the vessels in the random sample. This means that 0.099 percent of the random sample do not meet the requirement. The margin of error is plus or minus 3.04 percent. Applying this percentage to the population, we expect that the owner of 35 vessels will not meet the change in owner citizenship requirement if current ownership levels in each company remain the same (0.099 percent of 35,500 vessels).
In the random sample, there are 843 vessels (83 percent of the affected population) that are owned by individual persons and 167 vessels (17 percent of the affected population) that are owned by corporations or companies. All individual owners are already required to be U.S. citizens in order to document a vessel. Therefore, these vessels and individuals are considered to meet the citizenship requirement, and have 100 percent U.S. ownership. Corporations, partnerships or limited liability companies are required to attest to the level of ownership by U.S. citizens by checking a box in the application for documentation. The “Application for Initial Issue, Exchange, or Replacement of Certificate of Documentation; Redocumentation” (CG-1258 (REV.9-97)) has four choices for reporting the level of ownership by U.S. citizens in a corporation. The choices are: less than 50 percent, at least 50 percent, more than 50 percent but less than 75 percent, and 75 percent or more. One hundred sixty six (166) corporations certified that the ownership level by U.S. citizens is 75 percent or more. One certified that its corporation's percentage of stock owned by U.S. citizens who are eligible to document vessels was more than 50 percent but less than 75 percent. Start Printed Page 76574
Costs: For further analysis, we assume that the 35 adversely affected vessel owners have more than 50 but less than 75 percent of stock owned by U.S. citizens. We further assume that each vessel owner prefers to continue fishing in the Exclusive Economic Zone of the United States. Therefore, we expect each vessel owning company will make changes to its U.S. ownership level. The change of U.S. ownership level could entail the following: adding an additional investor, selling stock to U.S. citizens, adding a partner, or removing a partner.
Once each vessel owning company has met the ownership criteria, the vessel's fishery endorsement will be renewed, as it will be in any other year. Thus, the cost of this rulemaking is directly associated with the change of U.S. ownership level made by each of the 35 vessel owning companies. We assume that each company will hire a law firm to complete the articles of incorporation or any other documents needed to reflect the changes to the ownership levels, and that the law firm will charge about $600 for its services. The one time cost of changing the ownership structure for the 35 companies is $21,000.
We do not expect the restriction to leases and charters by non-U.S. citizens to impact any vessel owners. Similarly, we do not expect the restriction on foreign controlled mortgages to impact any vessels. Therefore, these regulations cause no additional cost to vessel owners, operators, or managers.
Benefits: The changes in the law necessitate this rulemaking. The regulation gives U.S. citizens a higher level of ownership in the vessels that harvest fish in the U.S. Exclusive Economic Zone. Consequently, more of the profits from the fishery industry will accrue to U.S. citizens.
Under the Regulatory Flexibility Act (5 U.S.C. 601-612), we considered whether this proposed rule will have a significant impact on a substantial number of small entities. The term “small entities” comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000.
This rule impacts the owners of about 35,500 vessels that are documented with fishery endorsements. These vessels are less than 100 feet in length, and we considered each one to be owned by a small entity. As shown by the sample statistics, we expect 35 entities to be adversely affected by the rulemaking. We do not consider the number of adversely affected entities to be a substantial number for they represent 0.099 percent of all entities that would have to comply with the requirements.
The Small Business Administration has determined that the size standard for small businesses involved in the fishing industry is $3 million in annual revenues (Standard Industry Codes 0912, 0913, 0919, and 0921). The imposed burden of $600 represents 0.02 percent for entities with $3 million in annual revenues. For entities with $60,000 and $30,000 in annual revenues, the burden represents 1 percent and 2 percent of annual revenues, respectively. We do not consider this cost to create a significant economic impact on the affected entities.
This rule calls for a new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). This rulemaking adds a new collection of information burden to companies that no longer meet the threshold of at least 75 percent ownership by U.S. citizens. This regulation allows these companies to apply for an exemption from the 75 percent U.S. ownership level. The application and related submissions comprise a new collection of information burden.
We presented an estimate of the burden this rulemaking will cause for public comment in the NPRM. No comments were received regarding the collection of information, and we perceive this to mean acceptance of the burden by the public.
As required by 44 U.S.C. 3507(d), we submitted a copy of this rule to the Office of Management and Budget (OMB) for its review of the collection of information. OMB has not approved the collection, and we will publish its approval when it occurs. The section numbers are §§ 67.350 and 67.352.
We have analyzed this rulemaking in accordance with the principles and criteria contained in E.O. 13132, (“Federalism”) and have determined that it does not have sufficient federalism implications to warrant the preparation of a federalism summary impact statement. The regulations have no substantial effects on the States, or on the current Federal-State relationship or on the current distribution of power and responsibilities among various local officials. Therefore, consultation with the State and local officials was not necessary.
This rule meets applicable standards in sections 3(a) and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize litigation, eliminate ambiguity, and reduce burden. Start Printed Page 76575
We considered the environmental impact of this rule and concluded that preparation of an Environmental Impact Statement is not necessary. An Environmental Assessment and a Finding of No Significant Impact are available in the docket where indicated under ADDRESSES.
Authority: 14 U.S.C. 664; 31 U.S.C. 9701; 42 U.S.C 9118; 46 U.S.C. 2103, 2107, 2110, 10102; 46 U.S.C. app. 841a, 876; 49 CFR 1.45, 1.46.
2. Amend § 67.11 by adding paragraph (c) to read as follows:
3. Amend § 67.21 by revising paragraph (d) and adding paragraphs (e) and (f) to read as follows:
4. Revise §§ 67.31(b) and (c), and add § 67.31(d) to read as follows:
(b) For the purpose of obtaining a fishery endorsement, at least 75 percent Start Printed Page 76576of the equity interest in the partnership, at each tier of the partnership and in the aggregate, is owned by citizens.
8. Revise § 67.39 by revising the introductory text of paragraphs (a), (b), and (c) and by revising paragraph (b)(2) to read as follows:
(i) If you are filing your petition before October 1, 2001, you may substitute evidence of the ownership structure as it exists on the date you file your petition; Start Printed Page 76577
[FR Doc. 00-31094 Filed 12-6-00; 8:45 am]