Fisheries of the Exclusive Economic Zone Off Alaska; Allocating Bering Sea and Aleutian Islands King and Tanner Crab Fishery Resources

Note: EPA no longer updates this information, but it may be useful as a reference or resource.

[Federal Register: October 29, 2004 (Volume 69, Number 209)]
[Proposed Rules]
[Page 63199-63248]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr29oc04-34]
[[Page 63200]]

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DEPARTMENT OF COMMERCE
National Oceanic and Atmospheric Administration
50 CFR Parts 679 and 680
[Docket No. 040831251-4251-01; I.D. 100804A]
RIN 0648-AS47

Fisheries of the Exclusive Economic Zone Off Alaska; Allocating
Bering Sea and Aleutian Islands King and Tanner Crab Fishery Resources

AGENCY: National Marine Fisheries Service (NMFS), National Oceanic and
Atmospheric Administration (NOAA), Commerce.
ACTION: Proposed rule; request for comments.

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SUMMARY: NMFS proposes regulations implementing Amendments 18 and 19 to
the Fishery Management Plan for Bering Sea/Aleutian Islands (BSAI) King
and Tanner Crabs (FMP). Amendments 18 and 19 amend the FMP to include
the Voluntary Three-Pie Cooperative Program (hereinafter
referred to as the Crab Rationalization Program (Program)). Congress
amended the Magnuson-Stevens Fishery Conservation and Management
Act (Magnuson-Stevens Act) to require the Secretary of Commerce
to approve the Program. The proposed action is necessary to increase
resource conservation, improve economic efficiency, and improve safety.
This action is intended to promote the goals and objectives of the
Magnuson-Stevens Act, the FMP, and other applicable law.

DATES: Comments must be received no later than December 13, 2004.

ADDRESSES: Send comments to Sue Salveson, Assistant Regional
Administrator, Sustainable Fisheries Division, Alaska Region, NMFS,
Attn: Lori Durall. Comments may be submitted by:
? Mail: P.O. Box 21668, Juneau, AK 99802.
? Hand Delivery to the Federal Building: 709 West 9th
Street, Room 420A, Juneau, AK.
? Facsimile: 907-586-7557.
? E-mail: KTC18-PR-0648-AS47@noaa.gov. Include in the
subject line of the e-mail the following document identifier:
Crab Rationalization RIN 0648-AS47. E-mail comments, with or
without attachments, are limited to 5 megabytes.
? Webform at the Federal eRulemaking Portal:
http://www.regulations.gov . Follow the instructions at
that site for submitting comments.
Send comments on collection-of-information
requirements to the same NMFS address and also to the Office of
Information and Regulatory Affairs, Office of Management and Budget,
Washington, DC 20503 (Attn: NOAA Desk Officer). Also, send comments to
David Rostker, OMB, by e-mail at DRostker@omb.eop.gov or by
facsimile to 202-395-7285.
Copies of Amendments 18 and 19 and the Environmental Impact
Statement (EIS) for this action may be obtained from the NMFS Alaska
Region at the address above or from the Alaska Region website at
http://www.fakr.noaa.gov/sustainablefisheries/crab/eis/
default.htm .The EIS contains as appendices the Regulatory
Impact Review (RIR), Initial Regulatory Flexibility Analysis (IRFA),
and Social Impact Assessment (SIA) prepared for this action.

FOR FURTHER INFORMATION CONTACT: Susan Salveson,
907-586-7228 or sue.salveson@noaa.gov.

SUPPLEMENTARY INFORMATION: In January 2004, Congress amended section
313 of the Magnuson-Stevens Act through the Consolidated
Appropriations Act of 2004 (Pub. L. 108-199, section 801), by
adding paragraph (j). As amended, section 313(j)(1) requires the
Secretary to approve by January 1, 2005, and implement thereafter, the
Program as it was adopted by the North Pacific Fishery Management
Council (Council). Amendments 18 and 19 amend the FMP to include the
Program.
This proposed rule implements Amendments 18 and 19 to the FMP. The
Notice of Availability for these amendments was published in the
Federal Register on September 1, 2004 (69 FR 53397). NMFS solicited
public comments on the proposed amendments through November 1, 2004.
NMFS published the amendments in September so that the decision date
for approval of the amendments will be before the statutory deadline of
January 1, 2005.
The Program would allocate BSAI crab resources among harvesters,
processors, and coastal communities. The Council developed the Program
over a 6-year period to accommodate the specific dynamics and
needs of the BSAI crab fisheries. The Program builds on the Council's
experiences with the halibut and sablefish Individual Fishing Quota
(IFQ) program and the American Fisheries Act (AFA) cooperative program
for Bering Sea pollock. The Program is a limited access system that
balances the interests of several groups who depend on these fisheries.
The Program would address conservation and management issues associated
with the current derby fishery and would reduce bycatch and associated
discard mortality. The Program also would increase the safety of crab
fishermen by ending the race for fish. Share allocations to harvesters
and processors, together with incentives to participate in fishery
cooperatives, would increase efficiencies, provide economic stability,
and facilitate compensated reduction of excess capacities in the
harvesting and processing sectors. Community interests would be
protected by Community Development Quota (CDQ) allocations and regional
landing and processing requirements, as well as by several community
protection measures.
This preamble first provides a Crab Rationalization Program
overview that presents a general description of all of the Program
components. Subsequent sections focus on the specifics of the following
Program components: quota share allocation, processor quota share
allocation, IFQ and individual processing quota (IPQ) issuance, quota
transfers, use caps, crab harvesting cooperatives, protections for Gulf
of Alaska groundfish fisheries, binding arbitration, monitoring,
economic data collection, and cost recovery fee collection.

Crab Rationalization Program Overview

The Program would apply to the following BSAI crab fisheries:
Bristol Bay red king crab (Paralithodes camtschaticus), Western
Aleutian Islands (Adak) golden king crab (Lithodes aequispinus)
- West of 174[deg] W., Eastern Aleutian Islands (Dutch Harbor)
golden king crab - East of 174[deg] W., Western Aleutian Islands
(Adak) red king crab - West of 179[deg] W., Pribilof Islands blue king
crab (P. platypus) and red king crab, St. Matthew Island blue king
crab, Bering Sea snow crab (Chionoecetes opilio), and Bering Sea Tanner
crab (C. bairdi). Golden king crab is also known as brown king crab. In
this document, the phrases ``crab fishery'' and ``crab fisheries''
refer to these fisheries, unless otherwise specified.
Several crab fisheries under the FMP would be excluded from the
Program, including the Norton Sound red king crab fishery, which is
operated under a ``superexclusive'' permit program intended to protect
the interests of local, small-vessel participants. Also excluded
from this Program are the Aleutian Islands Tanner crab fishery,
Aleutian Islands red king crab fishery east of 179[deg]
W. long., and
the Bering Sea golden king crab, scarlet king crab (L. couesi),
triangle Tanner crab (C. angulatus), and

[[Page 63201]]

grooved Tanner crab (C. tanneri) fisheries.

Harvest Sector

Qualified harvesters would be allocated quota share (QS) in each
crab fishery. To receive a QS allocation, a harvester must hold a
permanent, fully transferable license limitation program (LLP) license
endorsed for that crab fishery. Quota share represents an exclusive but
revokable privilege that provides the QS holder with an annual
allocation to harvest a specific percentage of the total allowable
catch (TAC) from a fishery. IFQs are the annual allocations of pounds
of crab for harvest that represent a QS holder's percentage of the TAC.
Using LLP licenses for defining eligibility in the Program would
maintain current fishery participation. A harvester's allocation of QS
for a fishery would be based on the landings made by his or her vessel
in that fishery. Specifically, each allocation would be the harvester's
average annual portion of the total qualified catch during a specific
qualifying period. Qualifying periods were selected to balance
historical and recent participation. Different periods were selected
for different fisheries to accommodate closures and other circumstances
in the fisheries in recent years.
Quota share would be designated as either catcher vessel (CV)
shares or catcher/processor (CP) shares, depending on the nature of the
LLP license and whether the vessel processed the qualifying harvests on
board. Catcher vessel IFQ would be issued in two classes, Class A IFQ
and Class B IFQ. Crabs harvested with Class A IFQ would require
delivery to a processor holding unused processing quota. Class A IFQ
landings also would be subject to a regional delivery requirement.
Under this regional requirement, landings would be delivered either in
a North or in a South region (in most fisheries). Crabs harvested with
Class B IFQ could be delivered to any processor and would not be
regionally designated. Landings in excess of IFQ would be forfeited in
all cases. Class B IFQs are intended to provide ex-vessel price
negotiating leverage to harvesters. For each region of each fishery,
the allocation of Class B IFQ would be 10 percent of the total
allocation of IFQ to the CV sector.
Transfer of QS and IFQ, either by sale or lease, would be allowed,
subject to limits including caps on the amount of shares a person may
hold or use. To be eligible to receive transferred QS or IFQ, a person
would have to meet specific eligibility criteria. Initial recipients of
QS, CDQ groups, and eligible crab community entities would be exempt
from the transfer eligibility criteria.
Separate caps would be imposed to limit the amount of QS and IFQ a
person could hold and to limit the use of IFQ on board a vessel. These
caps are intended to prevent negative impacts from what can be
described as excessive consolidation of shares. Excessive share
holdings are prohibited by the Magnuson-Stevens Act. Different
caps were chosen for the different fisheries because fleet
characteristics and dependence differ across fisheries. Separate caps
on QS holdings would be established for CDQ groups, which represent
rural western Alaska communities. Processor holdings of QS would also
be limited by caps on vertical integration. Quota share holders could
retain and use initial allocations of QS above the caps.

Crew Sector

To protect their interests in the fisheries, qualifying crew would
be allocated 3 percent of the initial QS pool. These shares are
intended to provide long term benefits to captains and crew. The
Council originally intended this provision to apply only to vessel
captains. However, NMFS has determined that documentation necessary to
allocate Crew QS, called C shares by the Council, would require that
these shares be initially issued to individuals who hold a State of
Alaska Interim Use Permit. Most likely, this individual would be the
captain; however, the State does not require that the holder of the
Interim Use Permit be the vessel captain. The allocation to crew would
be based on the same qualifying years and computational method used for
QS allocations to LLP license holders. Crew (C) QS would be issued as
CVC QS and CPC QS, depending on the activity in the qualifying years.
To ensure that Crew QS and IFQ benefit at-sea participants in
the fisheries, Crew IFQ could be used only when the IFQ holder is on
board the vessel, except when a Crew QS holder joins a cooperative.
To be eligible to receive an allocation, an individual would be
required to have historic and recent participation. Historic
participation would be demonstrated by at least one landing in each of
three of the qualifying years. Recent participation would be
demonstrated by at least one landing in two of the three most recent
seasons, with some specific exceptions.
CV Crew IFQ would be required to be delivered to shore-based
or floating processors for processing. CV Crew IFQ would not be subject
to specific delivery requirements until July 1, 2008. After July 1,
2008, CV Crew IFQ would be subject to the Class A IFQ/Class B IFQ
distinction with commensurate regional delivery requirements unless the
Council determines, after review, not to apply those designations.
Before July 1, 2007, the Council would review CV Crew IFQ landing
patterns to determine whether the distribution of landings among
processors and communities of CV Crew IFQ differs from the distribution
of IFQ landings.
CP crew would be allocated CPC QS and IFQ that include a harvesting
and on-board processing privilege. Harvests with CPC IFQ also
could be delivered to shore-based or floating processors.
Crew QS and IFQ could be transferred to eligible individuals.
Leasing of Crew IFQ would be permitted before July 1, 2008. After July
1, 2008, leasing would be permitted only in the case of a documented
hardship (such as a medical hardship or loss of vessel) for the term of
the hardship, subject to a maximum of 2 years over a 10-year
period. Individual Crew QS holdings would be capped.

Processing Sector

A processing privilege, analogous to the harvesting privilege
allocated to harvesters, would be allocated to processors. Qualified
processors would be allocated processor quota share (PQS) in each crab
fishery. PQS represents an exclusive but revocable privilege to receive
deliveries of a specific portion of the annual TAC from a fishery. An
annual allocation of pounds of crab based on the PQS is IPQ. IPQs would
be issued for 90 percent of the IFQ allocated harvesters, equaling the
amount of IFQ allocated as Class A IFQ. Processor privileges would not
apply to the remaining TAC allocated as Class B IFQ, or for Crew IFQ
until July 1, 2008. IPQs would be regionally designated for processing
(corresponding to the regional designation of the Class A IFQ).
PQS allocations would be based on processing history during a
specified qualifying period for each fishery. A processor's initial
allocation of PQS in a fishery would equal its share of all qualified
pounds of crab processed in the qualifying period. Processor shares
would be transferable, including the leasing of IPQs and the sale of
PQS, subject to caps and to community protection measures. IPQs could
be used without transfer at any facility or plant operated by a
processor. New processors could enter the fishery by purchasing PQS or
IPQ or by purchasing crab harvested with Class B IFQ or crab harvested
by CDQ groups or the Adak community entity.

[[Page 63202]]

A PQS holder would be limited to holding 30 percent of the PQS
issued for a fishery, except that initial allocations of shares above
this limit could be retained and used. In addition, in the snow crab
fishery, no processor would be permitted to use or hold in excess of 60
percent of the IPQs issued for the Northern region.

Catcher/Processor Sector

CPs have a unique position in the Program because they participate
in both the harvesting and processing sectors. To be eligible for CP
QS, a person would be required to hold a permanent, fully transferable
LLP license designated for CP use. In addition, a person must have
processed crab on board the CP, whose history gave rise to the LLP
license, in either 1998 or 1999. Persons meeting these qualification
requirements would be allocated CP QS in accordance with the allocation
rules for QS for all qualified catch that was processed on board. These
shares would represent a harvest privilege and an on-board
processing privilege. Catcher/Processor QS would not have regional
designations.

Regionalization

The regional delivery requirements for QS are intended to preserve
the historic geographic distribution of landings in the fisheries.
Communities in the Pribilof Islands are the prime beneficiaries of this
regionalization provision. Two regional designations would be created
in most fisheries. The North region would be all areas in the Bering
Sea north of 56[deg]20' N. latitude. The South region would be all
other areas. Catcher vessel QS, Class A IFQ, PQS, and IPQ would be
regionally designated. Crab harvested with regionally designated IFQ
would be required to be delivered to a processor in the designated
region. Likewise, a processor with regionally designated IPQ would be
required to accept delivery of and process crab in the designated
region. Legal landings in a region in the qualifying years would result
in QS and PQS designated for that region.
The Program has two exceptions to the North/South regional
designations. In the Western Aleutian Islands golden king crab fishery,
50 percent of the Class A IFQ and IPQ would be designated as west
shares to be delivered west of 174[deg]
W. longitude. The remaining 50
percent of the Class A IFQ and IPQ would have no regional designation
and would not be subject to a regional delivery requirement. The west
designation would be applied to all Class A IFQ and IPQ regardless of
the historic location of landings in the fishery. A second exception is
the Bering Sea Tanner crab fishery, which would have no regional
designation. This fishery is anticipated to be conducted primarily as a
concurrent fishery with the regionalized Bristol Bay red king crab and
Bering Sea snow crab fisheries, making the regional designation of
Tanner crab landings unnecessary.

Cooperatives

Harvesters may form voluntary cooperatives in order to collectively
manage their IFQ holdings. A minimum membership of four unique QS
holders would be required for cooperative formation. Quota share
holders who also (1) hold PQS or IPQ, (2) are affiliated with a person
who holds PQS or IPQ, (3) process Class B IFQ, or (4) are affiliated
with a person that processes Class B IFQ, would be prohibited from
joining a crab harvesting cooperative. A cooperative would be required
to apply for a cooperative IFQ permit. The cooperative IFQ permit would
display the aggregate amount of IFQ in each crab fishery that would be
yielded by the collective QS holdings of the members. IFQ could be
transferred between cooperatives, subject to NMFS' approval.
Cooperative members would be allowed to leave a cooperative or change
cooperatives on an annual basis prior to the July 1 deadline for the
annual cooperative IFQ permit application. Vessels that are used
exclusively to harvest cooperative IFQ would not be subject to use
caps. Cooperatives are free to associate with one or more processors to
the extent allowed by antitrust law.

Community Protection Measures

The Program includes several provisions intended to protect
communities from adverse impacts that could result from the Program.
Communities eligible for the community protection measures would be
those with 3 percent or more of the qualified landings in any crab
fishery included in the Program. Based on these criteria, NMFS has
preliminarily determined that the following crab communities meet this
criteria: Adak, Akutan, Dutch Harbor, Kodiak, King Cove, False Pass,
St. George, St. Paul, and Port Moller. All of these communities are
identified as eligible crab communities (ECCs) for purposes of
community protection measures.
``Cooling off'' provision. Until July 1, 2007, PQS and IPQ based on
processing history from the ECCs could not be transferred from those
communities. The use of IPQ outside the community during this period
would be limited to 20 percent of the IPQ and for specific hardships.
PQS and IPQ from three crab fisheries would be exempt from the cooling
off provision: Tanner crab, Western Aleutian Islands red king crab, and
Western Aleutian Islands golden king crab.
Individual processing quota caps. IPQ caps would be established to
limit the annual issuance of IPQs in seasons when the Bristol Bay red
king crab or snow crab TAC exceeds a threshold amount. Under these
circumstances, Class A IFQ issued in excess of these thresholds would
not be subject to the IPQ landing requirements but would be subject to
the regional delivery requirements.
Sea time waiver. Sea time eligibility requirements for the purchase
of QS would be waived for CDQ groups and community entities in ECCs,
allowing those communities to build and maintain local interests in
harvesting. CDQ groups and ECCs would be eligible to purchase PQS but
would not be permitted to purchase Crew QS.
Right of first refusal (ROFR). ECCs, except for Adak, would have a
ROFR on the transfer of PQS and IPQ originating from processing history
in the community if the transfer would result in relocation of the
shares outside the community. Adak would not be eligible for the ROFR
provision because Adak would receive a direct allocation of Western
Aleutian Islands golden king crab. In addition, the City of Kodiak and
the Kodiak Island Borough in the Gulf of Alaska (GOA) would have a ROFR
on the transfer of PQS and IPQ from communities in the GOA north of
56[deg]20' N. latitude.

Community Development Quota Program and Community Allocations

Community Development Quota Program. The CDQ Program would be
expanded to include the Eastern Aleutian Islands golden king crab
fishery and the Western Aleutian Islands red king crab fishery. In
addition, the CDQ allocations in all crab fisheries covered by the
Program would be increased from 7.5 to 10 percent of the TAC. The
increase would not apply to the CDQ allocation of Norton Sound red king
crab because this fishery is excluded from the Program. The crab CDQ
fisheries would be managed as separate commercial fisheries by the
State under authority deferred to it under the FMP. The State would
establish observer coverage requirements, State permitting
requirements, and transfer provisions among the CDQ groups. It also
would monitor catch to determine when quotas had been reached, enforce
any penalties

[[Page 63203]]

associated with quota overages, and monitor compliance with the
requirement that CDQ groups must deliver at least 25 percent of their
allocation to shore-based processors.
Crab harvested under the CDQ allocations (except Norton Sound red
king crab) would be subject to some of the Federal requirements that
apply to all crab fisheries under the Program including permitting,
recordkeeping and reporting, a vessel monitoring system, and the cost
recovery fees. The specifics of these requirements are discussed in
more detail in later sections.
The CDQ groups could participate in the crab fisheries as holders
of both QS and PQS. Some CDQ groups would be initial recipients of QS
because they hold LLP licenses and the appropriate catch history. In
addition, the CDQ groups would be exempt from the transfer eligibility
requirement related to sea time so they would be eligible to obtain QS
by transfer, subject to QS use caps for CDQ groups. The CDQ groups also
would be able to obtain PQS by transfer because there are no transfer
restrictions on PQS. While harvesting crab with IFQ, the CDQ groups
would be subject to the same regulations as apply to other IFQ holders.
The purchase and holding of QS and PQS by the CDQ groups would be
subject to the administrative regulations for the CDQ Program at 50 CFR
part 679. These regulations include information, reporting, prior
approval, and use requirements for all CDQ investments, which include
QS and PQS.
Adak allocation. An allocation of 10 percent of the TAC of Western
Aleutian Islands golden king crab would be made to the community of
Adak. The allocation to Adak would be made to a nonprofit entity
representing the community, with a board of directors elected by the
community. As an alternative and in the interim, the allocation and
funds derived from it could be held in trust by the Aleut Enterprise
Corporation for a period not to exceed 2 years, if the Adak community
non-profit entity is not formed prior to implementation of the
Program. Oversight of the use of the allocation for ``fisheries related
purposes'' would be deferred to the State under the FMP. NMFS would
have no direct role in oversight of the use of this allocation. The
State would provide an implementation review to the Council to ensure
that the benefits derived from the allocation accrue to the community
and achieve the goals of the fisheries development plan. The Adak
allocation would be managed as a separate commercial fishery by the
State in a manner similar to management of the crab CDQ fisheries. As
with the CDQ allocations, crab harvested under the Adak allocation
would be subject to several requirements that apply to all crab
fisheries under the Program including permitting, recordkeeping and
reporting, a vessel monitoring system, and the cost recovery fees.
Community purchase. Any non-CDQ community in which 3 percent
or more of any crab fishery was processed could form a
non-profit entity to receive QS, IFQ, PQ and IPQ transfers on
behalf of the community. The non-profit entity would be called
an eligible crab community organization (ECCO).

Protections for Participants in Other Fisheries

The Program would greatly increase the flexibility for crab
fishermen to chose when and where to fish for their IFQ, and this
increased flexibility would provide crab fishermen with increased
opportunity to participate in other fisheries. Restrictions on the
participants in other fisheries, also called sideboards, would restrict
a vessel's harvests to its historical landings in all GOA groundfish
fisheries (except the sablefish fishery). Vessels with less than
100,000 pounds (45,359 kg) of total snow crab landings and more than
500 metric tons (mt) (1,102,311 lb) of total Pacific cod landings in
the GOA during the qualifying years would be exempt from the
restrictions. In addition, vessels with less than 50 mt (110,231 lb) of
total groundfish landings in the GOA during the qualifying period would
be prohibited from harvesting Pacific cod from the GOA. Restrictions
would be applied to vessels but would also restrict landings made using
a groundfish LLP license derived from the history of a vessel so
restricted, even if that LLP license is used on another vessel.
Groundfish sideboards in the GOA would be managed by NMFS through
fleet-wide sideboard directed fishing closures in Federal waters
and for the parallel fishery in state waters.

Arbitration System

BSAI crab fisheries have a history of contentious price
negotiations. Harvesters have often acted collectively to negotiate an
ex-vessel price with processors, which at times delayed fishing.
The Arbitration System was developed to compensate for complications
arising from the creation of QS/IFQ and PQS/IPQ. The complications
include price negotiations that could continue indefinitely and result
in costly delays and the ``last person standing'' problem where the
last Class A IFQ holder to contract deliveries would have a single IPQ
holder to contract with, effectively limiting any ability to use other
processor markets for negotiating leverage. To ensure fair price
negotiations, the Arbitration System includes a provision for open
negotiations among IPQ and IFQ holders as well as various negotiation
approaches, including: (a) a share matching approach where IPQ holders
make known to unaffiliated IFQ holders that have uncommitted IFQ
available the amount of uncommitted IPQ they have available so the IFQ
holder can match up its uncommitted IFQ by indicating an intent to
deliver its catch to that IPQ holder; (b) a lengthy season approach
that allows parties to postpone binding arbitration until sometime
during the season; and (c) a binding arbitration procedure to resolve
price disputes between an IPQ holder and eligible IFQ holders.
The arbitration process would begin preseason with a market report
for each fishery prepared by an independent market analyst selected by
the PQS and QS holders and the establishment of a non-binding
fleet wide benchmark price by an arbitrator who has consulted with
fleet representatives and processors. Information provided by the
sectors would be historical in nature and at least 3 months old. This
non-binding price would guide the above described negotiations.
Information sharing among IPQ and IFQ holders, collective negotiations,
and release of arbitration results would be limited to minimize the
antitrust risks of participants in the Program.
The binding arbitration procedure in a last best (or final) offer
format. The IPQ holder, each IFQ holder, and each crab harvesting
cooperative could submit an offer. For each IFQ holder or cooperative,
the arbitrator would select between the IFQ holder's (or cooperative's)
offer and the IPQ holder's offer. After an arbitration decision is
rendered, an eligible IFQ holder with uncommited IFQ could
opt-in to the completed contract by accepting all terms of the
arbitration decision as long as the IPQ holder held sufficient
uncommitted IPQ.

Monitoring and Enforcement

NMFS and the State of Alaska would coordinate monitoring and
enforcement of the crab fisheries. Harvesting and processing activity
would need to be monitored for compliance with the implementing
regulations. Methods for catch accounting and catch monitoring plans
would generate data to provide accurate and reliable round weight
accounting of the total catch and landings to manage quota share

[[Page 63204]]

accounts, prevent overages of IFQ and IPQ, and determine
regionalization requirements and fee liability. Monitoring measures
would include landed catch weight and species composition, bycatch, and
deadloss to estimate total fishery removals.

Economic Data Collection

The Program includes a comprehensive economic data collection
program to aid the Council and NMFS in assessing the success of the
Program and developing amendments necessary to mitigate any unintended
consequences. An Economic Data Report (EDR), containing cost, revenue,
ownership, and employment data, would be collected on a periodic basis
from the harvesting and processing sectors. The data would be used to
study the economic impacts of the Program on harvesters, processors,
and communities. Participation in the data collection program would be
mandatory for all participants in the crab fisheries.

Cost Recovery and Fee Collection

NMFS would establish a cost recovery fee system, required by
section 304(d)(2) of the Magnuson-Stevens Act, to recover actual
costs directly related to the management and enforcement of the
Program. The crab cost recovery fee would be paid in equal shares by
the harvesting and processing sectors and would be based on the
ex-vessel value of all crab harvested under the Program,
including CDQ crab and Adak crab. NMFS also would enter into a
cooperative agreement with the State of Alaska to use IFQ cost recovery
funds in State management and observer programs for BSAI crab
fisheries. The crab cost recovery fee is prohibited from exceeding 3
percent of the annual ex-vessel value. Within this limit, the
collection of up to 133 percent of the actual costs of management and
enforcement under the Program would be authorized, which would provide
for fuller reimbursement of management costs after allocation of 25
percent of the cost recovery fees to the crew loan program.

Crew Loan Program

To aid captains and crew in purchasing QS, a low interest loan
program (similar to the loan program under the halibut and sablefish
IFQ program) would be created. This program would be funded by 25
percent of the cost recovery fees as required by the
Magnuson-Stevens Act. Loan money would be accessible only to
active participants and could be used to purchase either QS or Crew QS.
Quota share purchased with loan money would be subject to all use and
leasing restrictions applicable to Crew QS for the term of the loan.
This proposed rule does not contain proposed regulations to implement
the crew loan program. Those proposed regulations will be developed by
NMFS Financial Services.

Annual Reports and Program Review

NMFS, in conjunction with the State of Alaska, would produce annual
reports on the Program. Before July 1, 2007, the Council would review
the PQS, binding arbitration, and C share components of the Program.
After July 1, 2008, the Council would conduct a preliminary review of
the Program. A full review of the entire Program would be undertaken in
2010. Additional reviews would be conducted every 5 years. These
reviews are intended to objectively measure the success of the Program
in achieving the goals and objectives specified in the Council's
problem statement and the Magnuson-Stevens Act. These reviews
would examine the impacts of the Program on vessel owners, captains,
crew, processors, and communities, and include an assessment of options
to mitigate negative impacts.
The following sections provide more detail on the key components of
the Program.

Quota Share Allocation

This section identifies those who would be eligible to receive QS
in the initial allocation and describes the four QS sectors. The
following sections discuss the application process and the proposed
mechanism for deriving QS and IFQ in each sector. Qualified harvesters
would be allocated QS in each crab fishery. To receive an initial QS
allocation, a person must either: (1) hold a permanent, fully
transferable LLP license endorsed for that crab fishery; or (2) have
made a landing under the authority of a State of Alaska Interim Use
Permit issued to crew members by the State of Alaska. Quota share would
represent an exclusive but revokable privilege that provides the QS
holder with an annual allocation to harvest a specific percentage of
the TAC from a fishery. The annual allocations to QS holders of TAC, in
pounds, are referred to as IFQ.

QS Sectors

The sector of QS issued would be based on eligibility and fishing
activity during the qualified period. These distinctions yield four
sectors of QS, as follows:
(1) Catcher Vessel Owner (CVO) QS would be issued to an LLP license
holder who harvested and delivered unprocessed crab to a processor.
(2) Catcher/Processor Owner (CPO) QS would be issued to a CP LLP
license holder for crab harvested and processed crab on board the same
vessel or under that LLP license.
(3) Catcher Vessel Crew (CVC) QS would be issued to a crew member
who held a State of Alaska Interim Use Permit and signed a fish ticket
for the delivery of crab during the qualifying period.
(4) Catcher/Processor Crew (CPC) QS would be issued to a crew
member who held a State of Alaska Interim Use Permit and signed a fish
ticket for crab processed at-sea on the vessel that harvested that crab.

Official Crab Rationalization Record

Prior to issuing any QS, NMFS would compile an official record that
contains the best available information on the harvesting and
processing activities in the crab fisheries. This record would be the
basis for determining QS allocations. In order to facilitate the timely
issuance of QS, NMFS would require any claims that are contrary to the
official record to be substantiated before changing the official
record.
NMFS would establish certain operational standards about the use of
landings in the official record to facilitate timely issuance of QS.
First, NMFS would not issue CPO or CVO QS to any person other than to
the applicant who holds the LLP license at the time of application. The
Council clearly established that the basis for recognizing and
allocating QS is the possession of an LLP license endorsed for the crab
fishery, the associated legal landings that were made on the vessel
that resulted in the issuance of the LLP license and endorsement, and
any landings that were made under the authority of that LLP license.
Second, NMFS would assume any of the legal landings recorded on
State of Alaska fish tickets to be correct. An applicant who has
information to suggest the fish ticket records are inaccurate would
have the burden of proving that to be the case.
Third, NMFS would assume the LLP license issued based on the
landings made on a vessel continued to be used on that same vessel,
unless the applicant shows, with written documentation, that the LLP
license was transferred and used on another vessel. NMFS would make
this assumption because, during the years 2000 and 2001, NMFS did not
track the vessel on which the LLP license was used. Thus, NMFS would
require an applicant to inform NMFS if the LLP license was

[[Page 63205]]

used on a vessel other than the vessel for which the LLP license was
originally issued. Written documentation establishes a clear record of
any transfer of LLP license use prior to tracking by NMFS.
Fourth, if more than one person is claiming legal landings or legal
processing activities during the same time at the same processing
facility or on board the same vessel, then each person eligible to
receive QS or PQS based on those legal landings or legal processing
activities would receive any QS or PQS issued divided in equal
proportion among all eligible recipients for that time period. This pro
rata division of QS would occur unless the applicants can provide
written documentation establishing an alternative means for
distributing the QS or PQS resulting from the activities during that
time period.

Catcher Vessel Owner - CVO QS Sector

Eligibility to receive QS at initial allocation would be limited to
U.S. citizens who hold a permanent, fully transferable LLP license at
the time of application. This means any corporation applying to receive
CVO QS must also be incorporated as a U.S. corporation.
The landings that would be considered as the basis for a QS
allocation for a crab fishery would be those made on the vessel used to
qualify for the LLP license and species endorsement for that fishery or
were made by the vessel on which that LLP license was used. NMFS would
initially allocate QS only to the person holding that LLP license at
the time of application. Any subsequent transfer of QS after initial
issuance by the qualified LLP license holder would be subject to the QS
transfer provisions described later in this preamble. NMFS would
establish that the landings made under the authority of an LLP license
are non-severable from that license. In other words, ``catch
history'' that has been separated from an LLP license would not be
considered for initial allocation of QS.
The proposed definition of persons eligible to receive an initial
allocation of CVO QS and the qualifying periods used to determine the
allocation of QS are described in the following table:

Table 1--Eligibility to Receive Catcher Vessel Owner (CVO) and Catcher Processor Owner (CPO) Quota Share (QS) and Associated Qualifying Year Periods
--------------------------------------------------------------------------------------------------------------------------------------------------------
Qualifying Year Periods for Determining QS
Eligible Person to Receive QS Crab Fisheries Allocation
--------------------------------------------------------------------------------------------------------------------------------------------------------
Eastern Aleutian Island golden king crab 5 years of the 5-year base period beginning
General: A citizen of the United States at the time of (EAG) on September 1, 1996, and ending on
application for QS, and is... September 24, 2000.

CVO QS: The holder of a permanent, fully transferable LLP
license endorsed for that crab fishery at the time of
application to receive QS and who is a citizen of the
United States at the time of application for QS; or

---------------------------------------------------------------------------------------------
CPO QS: (1) The holder of a permanent, fully transferable Western Aleutian Island golden king crab 5 years of the 5-year base period beginning
LLP license endorsed for that crab fishery and endorsed (WAG) on September 1, 1996, and ending on March
for CP activities at the time of application to receive 30, 2001.
QS; and (2) Harvested and processed at-sea any crab
species in any BSAI crab fishery during the years 1998 or
1999.
---------------------------------------------------------------------------------------------
Bering Sea Tanner crab (BST) 4 years of the 6-year period beginning on
November 15, 1992, through November 27,
1996.
---------------------------------------------------------------------------------------------
Bering Sea snow crab (BSS) 4 years of the 5-year period beginning on
January 15, 1996, and ending on April 8,
2000.
---------------------------------------------------------------------------------------------
Bristol Bay red king crab (BBR) 4 years of the 5-year base period beginning
on November 1, 1996, and ending on October
20, 2000.
---------------------------------------------------------------------------------------------
Pribilof Islands red and blue king crab (PIK) 4 years of the 5-year period beginning on
September 15, 1994, and ending on September
28, 1998.
---------------------------------------------------------------------------------------------
St. Matthew blue king crab (SMB) 4 years of the 5-year period beginning on
September 15, 1994, and ending on September
26, 1998.
---------------------------------------------------------------------------------------------
Western Aleutian Islands red king crab (WAI) 3 years of the 4-year period beginning on
November 1, 1992, and ending on February 13,
1996.
---------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------------------------------

[[Page 63206]]

Catcher Processor Owner - CPO QS Sector

The eligibility to receive a CPO QS is essentially the same as for
CVO QS. In order to receive CPO QS, a person would have to be a U.S.
citizen who holds a permanent, fully transferable LLP license at the
time of application. The LLP license would have to be endorsed for the
fisheries for which the QS would be issued and would have to be
endorsed to allow the person to harvest and process crab as a CP. Only
landings harvested and processed on board the vessel during the
qualifying years would be used toward CPO QS. The qualifying periods
and number of qualifying years used in CPO QS initial issuance
calculations would be the same as those in Table 1. In addition, any
person who applies to receive CPO QS would have to have made crab
landings that were processed at-sea in either 1998 or 1999.
These provisions are intended to ensure that LLP licenses with a
history of harvesting and processing at-sea have continued to do
so recently, in order to reduce the amount of QS that would be issued
for use on vessels that are no longer active in the fishery.

Catcher Vessel Crew - CVC QS Sector

CVC QS would be issued based on different eligibility criteria.
Table 2 summarizes the persons who would be eligible to receive an
initial allocation of CVC QS, the qualifying years used, and the number
of years that could be selected for initial allocation of QS.
Individuals would be qualified to receive QS if they are designated on
a State of Alaska Interim Use Permit and had historic and recent
participation. NMFS would determine participation based on signed State
of Alaska fish tickets because the State of Alaska requires individuals
who sign a fish ticket to hold a State of Alaska Interim Use Permit.
Historic participation would be demonstrated by at least one
landing in each of three of the qualifying years. Recent participation
would be demonstrated by at least one landing in two of the three most
recent seasons before June 10, 2002, except for the fisheries that were
closed in this period. For these fisheries, Western Aleutian Islands
red king crab, the Pribilof Islands red and blue king crab, the St.
Matthew Island blue king crab, and Tanner crab, recent participation
would be demonstrated by at least one landing in two of the three most
recent seasons preceding June 10, 2002, in the snow crab, Bristol Bay
red king crab, or one of the Aleutian Islands golden king crab
fisheries. The recent participation requirement would be waived for
captains who died in fishing-related incidents if the captain's
estate applies for QS. See the following table for details:

Table 2--Eligibility to Receive Catcher Vessel Crew (CVC) Quota Share (QS) and Qualifying Year Periods
--------------------------------------------------------------------------------------------------------------------------------------------------------
Number of Qualifying Year Periods
Eligible Person to Receive QS Crab Fisheries for Determining QS Initial Qualifying Seasons for
Allocation Determining Recent Participation
--------------------------------------------------------------------------------------------------------------------------------------------------------
Eastern Aleutian golden king crab 3 years of the 5-year base period (1) September 1, 1999, through
An individual who: (EAG) beginning on September 1, 1996, October 25, 1999.
and ending on September 24, (2) August 15, 2000, through
(1) is a citizen of the United States, or his or 2000. September 24, 2000.
her successor-in-interest if that individual is (3) August 15, 2001, through
deceased; September 10, 2001.

(2) has historical participation in the fishery
demonstrated by being the individual named on a
State of Alaska Interim Use Permit who made at
least one legal landing per year for any 3
qualifying years under that permit based on
data from fish tickets maintained by the State
of Alaska; and

(3) has recent participation in the fishery
demonstrated by being the individual named on a
State of Alaska Interim Use Permit who made at
least one legal landing under that permit in
any 2 of 3 seasons based on data from fish
tickets maintained by the State of Alaska.
-------------------------------------------------------------------------------------------------------
Western Aleutian golden king crab 3 years of the 5-year base period (1) September 1, 1999, through
(WAG) beginning on September 1, 1996, August 14, 2000.
and ending on March 30, 2001. (2) August 15, 2000, through
March 28, 2001.
(3) August 15, 2001, through
March 30, 2002.
-------------------------------------------------------------------------------------------------------
Bering Sea Tanner crab (BST) 3 years of the 6-year period any 2 of the last 3 seasons
beginning on November 15, 1992, prior to June 10, 2002 in the
through November 27, 1996. Eastern Aleutian Island golden
king crab, Western Aleutian
Island golden king crab, Bering
Sea snow crab, or Bristol Bay
red king crab fisheries.
-------------------------------------------------------------------------------------------------------

[[Page 63207]]

Bering Sea snow crab (BSS) 3 years of the 5-year period ................................
beginning on January 15, 1996, (1) April 1, 2000, through April
and ending on April 8, 2000. 8, 2000.
(2) January 15, 2001, through
February 14, 2001.
(3) January 15, 2002, through
February 8, 2002.
-------------------------------------------------------------------------------------------------------
Bristol Bay red king crab (BBR) 3 years of the 5-year base period ................................
beginning on November 1, 1996, (1) October 16, 2000, through
and ending on October 20, 2000. October 20, 2000.
(2) October 15, 2001, through
October 18, 2001.
(3) October 15, 2002, through
October 18, 2002.
-------------------------------------------------------------------------------------------------------
Pribilof Islands red and blue 3 years of the 5-year period any 2 of the last 3 seasons
king crab (PIK) beginning on September 15, 1994, prior to June 10, 2002, in the
and ending on September 28, Eastern Aleutian Island golden
1998. king crab, Western Aleutian
Island golden king crab, Bering
Sea snow crab, or Bristol Bay
red king crab fisheries, except
that persons applying for an
allocation to receive QS based
on legal landings made aboard a
vessel less than 60' LOA at the
time of harvest are exempt from
this requirement.
-------------------------------------------------------------------------------------------------------
St. Matthew blue king crab (SMB) 3 years of the 5-year period any 2 of the last 3 seasons
beginning on September 15, 1994, prior to June 10, 2002, in the
and ending on September 26, Eastern Aleutian Island golden
1998. king crab, Western Aleutian
Island golden king crab, Bering
Sea snow crab, or Bristol Bay
red king crab fisheries.
-------------------------------------------------------------------------------------------------------
Western Aleutian Islands red king 3 years of the 4-year period any 2 of the last 3 seasons
crab (WAI) beginning on November 1, 1992, prior to June 10, 2002, in the
and ending on February 13, 1996. Eastern Aleutian Island golden
king crab, Western Aleutian
Island golden king crab, Bering
Sea snow crab, or Bristol Bay
red king crab fisheries.
-------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------------------------------

In addition, the Program exempts crew members who participated in
small vessels (under 60 feet in length) from seasonal requirements in
the Pribilof Islands red and blue king crab fisheries. Such small
vessels have traditionally participated in the fishery, but have been
limited in recent years due to hazardous weather conditions.

[[Page 63208]]

This exemption for small vessels would allow crew serving in the
fishery to be considered for initial allocation.

Catcher Processor Crew - CPC QS Sector

Catcher/Processor crew would be allocated CPC QS that include a
harvesting and on-board processing privilege. Harvests with CPC
QS also may be delivered to shore-based or floating processors.
The definition of an eligible person, the qualifying years, and the
seasonal recent participation requirements for the CPC QS sector would
be the same as those for the CVC QS sector described in Table 2 above.
The allocation to the CPC QS sector would be based on an individual
landing under the authority of a State of Alaska Interim Use Permit and
processing the catch on board the vessel that made the landing.

Regional Designations of QS

In addition to the four QS sectors issued in each of the eight crab
fisheries, QS would have regional delivery requirements. Regional
delivery requirements are based on the specific geographic location in
which the crab were landed during the qualifying years. Any QS that is
subject to regional landing requirements must be delivered to a
Registered Crab Receiver (RCR) operating in that region. Regional
designations would apply to: (1) QS initially issued to the CVO QS
sector, (2) CPO QS subsequently transferred for use as CVO QS under the
transfer provisions, or (3) after July 1, 2008, QS initially issued for
the CVC QS sector. Regional designations would not apply to CPO QS or
to CPC QS. Any QS not subject to regional designation would be issued
as an ``Undesignated'' region. The regional designations for each of
the fisheries are summarized in the following table:

Table 3--Regional Designations of Quota Share (QS) and Processor Quota Share (PQS)
----------------------------------------------------------------------------------------------------------------
North Region, South Region, West Region,
North of South of West of
Crab Fishery 56[deg]20' N. 56[deg]20' N. 174[deg]
W. Undesignated
lat. lat. long.
----------------------------------------------------------------------------------------------------------------
EAG -Eastern Aleutian golden X X ............... ...................
king crab
----------------------------------------------------------------------------------------------------------------
WAG -Western Aleutian golden ................. ................. X X
king crab
----------------------------------------------------------------------------------------------------------------
BST -Bering Sea Tanner crab ................. ................. ............... X
----------------------------------------------------------------------------------------------------------------
BSS -Bering Sea snow crab X X ............... ...................
----------------------------------------------------------------------------------------------------------------
BBR -Bristol Bay red king crab X X ............... ...................
----------------------------------------------------------------------------------------------------------------
PIK -Pribilof Islands red and X X ............... ...................
blue king crab
----------------------------------------------------------------------------------------------------------------
SMB -St. Matthew blue king X X ............... ...................
crab
----------------------------------------------------------------------------------------------------------------
WAI -Western Aleutian Islands ................. X ............... ...................
red king crab
----------------------------------------------------------------------------------------------------------------

The North Region would include all landings made in that crab
fishery North of a line at 56[deg]20' N. latitude in the Bering Sea
subarea of the EEZ. The South Region would include all landings made in
the EEZ south of that line. The West Region would apply only to the
Western Aleutian Islands golden king crab fishery. Under this regional
designation, 50 percent of the CVO QS issued in the fishery would be
designated as West Region and would be limited for delivery West of a
line at 174[deg] W. longitude. Undesignated QS may be delivered in any
region.

Calculation of QS Issuance

The amount of QS that would initially be issued to any one person
would be based on the amount of legal landings made by that person as a
percentage of the total legal landings made by all persons eligible to
receive QS. NMFS would build the official crab rationalization record,
which would contain the total legal landings for each fishery based on
the best available information using the State of Alaska fish ticket
database. The official record would be established for the CVO and CPO
QS sectors based on the total legal landings during the qualifying
years that resulted in the issuance of LLP licenses or that were made
under the authority of an LLP license. The official record for the CVC
and CPC QS sectors would be based on the total legal landings made
under the authority of State of Alaska Interim Use Permits during the
qualifying years. The official record is presumed to be correct unless
an applicant provides information indicating a correction is necessary.
The computation process for CVO and CPO QS and the computation
process for CVC and CPC are the same. The process for determining
initial allocation of CVO and CPO QS is detailed first. The following
steps would be used to calculate QS for an applicant.
Establish harvest denominator. The official crab rationalization
record would result in a harvest denominator for all LLP licenses that
would be used in calculating QS. The harvest denominator represents the
total legal landings made in each year for each crab fishery.
The use of a harvest denominator allows NMFS to calculate the
relative percentage of the legal landings made by a person applying to
receive QS without having to adjust the relative percentage of all
other applicants if additional applications are approved after appeal.
The harvest denominator would remain fixed for all applicants. One
harvest denominator would be established for the CVO and CPO QS
sectors, and one for the CVC and CPC QS sectors because the number of
qualifying years used differ.
Computation of initial issuance of CVO and CPO QS. In order to
facilitate understanding of the computation, a hypothetical example is
used to illustrate the process. This example does not use data or
persons from existing crab fisheries and is intended for illustrative
purposes only. In our example, there are only two participants in the
fishery, LLP A and LLP B, each with different landing patterns. The
total legal landings, the region in which those landings were made, the
amount of the landings harvested on board the vessel and processed
at-sea, and the computation process using two LLPs (A and B) are
described in the following table:

[[Page 63209]]

Table 4--Hypothetical Crab Fishery - Best 3 of 4 Years Used - Calculation of Catcher Vessel Owner (CVO) and
Catcher Processor Crew (CPO) Quota Share (QS) Initial Issuance for LLPs
----------------------------------------------------------------------------------------------------------------
Total of
Year 1 Year 2 Year 3 Year 4 Years Used
----------------------------------------------------------------------------------------------------------------
1. Harvest Denominator in Fishery 1,000 lb 500 lb 3,000 lb 1,333 lb 5,833 lb
(Legal Landings)
----------------------------------------------------------------------------------------------------------------
2. Total Legal Landings of LLP A 500 lb 200 lb 1,000 lb 1,000 lb 2,700 lb
----------------------------------------------------------------------------------------------------------------
3. Percentage of Harvest 50 %
40 %
33.3 % 75 % 55.0 %
Denominator for LLP A (year used) (Used) (Used) (Used)
----------------------------------------------------------------------------------------------------------------
(3A) Total Landings Landed Onshore 500 100 500 200 800 lb
for LLP A
----------------------------------------------------------------------------------------------------------------
(3B) Total Landings Processed At- 0 100 500 800 900 lb
sea for LLP A
----------------------------------------------------------------------------------------------------------------
(3C) Percentage of Landings Landed on Shore for LLP A = (800 / (800 + 900)) = 47.06 %
----------------------------------------------------------------------------------------------------------------
(3D) Percentage of Landings Processed At-sea for LLP A = (900 / (800 + 900)) = 52.94 %
----------------------------------------------------------------------------------------------------------------
(3E) Total Onshore Landings in the 500 100 0 200 800 lb
North Region for LLP A
----------------------------------------------------------------------------------------------------------------
(3F) Total Onshore Landings in the 0 0 500 0 0 lb
South Region for LLP A
----------------------------------------------------------------------------------------------------------------
(3G) Percentage of Landings in the North Region for LLP A = (800 / (800 + 0)) = 100 %
----------------------------------------------------------------------------------------------------------------
(3H) Percentage of Landings in the South Region for LLP A = (0/ (800 + 0)) = 0 %
----------------------------------------------------------------------------------------------------------------
4. Total Legal Landings of LLP B 500 lb 300 lb 2,000 lb 333 lb 3,800 lb
----------------------------------------------------------------------------------------------------------------
5. Percentage of Harvest 50 %
60 %
66.6 % 25 % 58.9 %
Denominator for LLP B (Used) (Used) (Used)
----------------------------------------------------------------------------------------------------------------
(5A) Total Landings Landed Onshore 500 300 1,500 200 2,300 lb
for LLP B
----------------------------------------------------------------------------------------------------------------
(5B) Total Landings Processed At- 0 0 500 800 500 lb
sea for LLP B
----------------------------------------------------------------------------------------------------------------
(5C) Percentage of Landings Landed on Shore for LLP B = (2,300 / (2,300 + 500)) = 82.14 %
----------------------------------------------------------------------------------------------------------------
(5D) Percentage of Landings Processed At-sea for LLP B = (500 / (2,300 + 500)) = 17.86 %
----------------------------------------------------------------------------------------------------------------
(5E) Total Onshore Landings in the 500 300 500 0 1,300 lb
North Region for LLP B
----------------------------------------------------------------------------------------------------------------
(5F) Total Onshore Landings in the 0 0 1,000 200 1,000 lb
South Region for LLP B
----------------------------------------------------------------------------------------------------------------
(5G) Percentage of Landings in the North Region for LLP B = (1,300 / (1,300 + 1,000)) = 56.52 %
----------------------------------------------------------------------------------------------------------------
(5H) Percentage of Landings in the South Region for LLP B = (1,000 / (1,300 + 1,000)) = 43.48 %
----------------------------------------------------------------------------------------------------------------
6. Sum of Total Percentages of Harvest Denominators for All LLPs = LLP A 55 (Line 3) + LLP B 58.9 (Line 5) =
113.9 %
----------------------------------------------------------------------------------------------------------------
7. Percentage of the Sum of the Percentage of the Harvest Denominator for LLP A = (0.550/1.139) = 0.4829 or
48.29 %
----------------------------------------------------------------------------------------------------------------
8. Percentage of the Sum of the Percentage of the Harvest Denominator for LLP B = (0.589/1.139) = 0.5171 or
51.71 %
----------------------------------------------------------------------------------------------------------------
9. Initial QS Pool = 9,000 Units
----------------------------------------------------------------------------------------------------------------
10. Unadjusted Initial QS Allocation for LLP A = 48.29 %
x 9,000 = 4,346 QS Units
----------------------------------------------------------------------------------------------------------------
11. Unadjusted Initial QS Allocation for LLP B = 51.71 %
x 9,000 = 4,654 Units
----------------------------------------------------------------------------------------------------------------
12. Initial QS Allocation for LLP A = 4,346 QS Units x (0.97) = 4,216 QS Units
----------------------------------------------------------------------------------------------------------------
13. Initial QS Allocation for LLP B = 4,654 QS Units x (0.97) = 4,514 QS Units
----------------------------------------------------------------------------------------------------------------
14. Percentage of LLP A QS Allocation as CVO QS = 4,216 x 0.4706 (Line 3C) = 1,984 CVO QS Units
----------------------------------------------------------------------------------------------------------------
15. Percentage of LLP A QS Allocation as CPO QS = 4,216 x 0.5294 (Line 3D) = 2,232 CPO QS Units
----------------------------------------------------------------------------------------------------------------
16. Percentage of LLP B QS Allocation as CVO QS = 4,514 x 0.8214(Line 5C) = 3,708 CVO QS Units
----------------------------------------------------------------------------------------------------------------
17. Percentage of LLP B QS Allocation as CPO QS = 4,514 x 0.1786 (Line 5D) = 806 CPO QS Units
----------------------------------------------------------------------------------------------------------------

[[Page 63210]]

Determine the total legal landings for each applicant. First, NMFS
would sum the total legal landings for each LLP license, in each of the
crab fisheries for which the LLP is endorsed, for each of the
qualifying years. If there were no legal landings in a qualifying year,
then the amount would be zero for that year. If a person is applying to
receive QS using multiple licenses, the total legal landings would be
summed for each license separately. In our hypothetical example this
corresponds to Line 2 in Table 4 for LLP A and Line 4 for LLP B.
Determine the percentage of the harvest denominator in each year.
NMFS would divide the total legal landings for that person by the
harvest denominator for each year. This yields the percentage of the
harvest denominator. For LLP A, this corresponds to Line 3 in Table 4.
For LLP B, this corresponds to Line 5.
Determine the qualifying years to be used. Most of the crab
fisheries have a ``best of'' provision in which only a select number of
the qualifying years are actually used in the QS computation. NMFS
would determine which years are used for each initial QS allocation by
determining the years that represent the highest percentage of the
harvest denominator. In our hypothetical example, 3 of the 4 years
representing the greatest percentage of the harvest denominator in each
year would be used. This method ensures that a person applying to
receive QS would receive a QS allocation based on the highest
percentage of the total landings in each year. For LLP A, this
corresponds to the italicized years noted as ``(Used)'' in Line 3 of
Table 4. For LLP B, this corresponds to Line 5. If a person has
insufficient years of landings, one or more ``0 lb'' years would be
``(Used).''
Sum the percentages of the harvest denominator for each LLP
license. The next step is to sum the percentages for the years used for
each LLP license held by the applicant. Then, that amount is divided by
the total number of years used for that crab fishery. In our
hypothetical example, for LLP A, this would be the sum of the
italicized percentages in Line 3 of Table 4 divided by three, or (50
percent + 40 percent + 75 percent)/3 = 55.0 percent. The same
computation is provided for LLP B in Line 5 of Table 4, and is equal to
58.9 percent.
Sum the average percent of the harvest denominator. In our example,
the percentage of the harvest denominator is 55.0 percent (for LLP A)
and 58.9 percent (for LLP B). The sum of the percentages of all LLP
licenses is 113.9 percent. This computation is shown in Line 6 of Table
4. The reason that the amount is greater than 100 percent is that NMFS
uses the best years of each LLP license to determine the percentage of
the harvest denominator that the landings represent.
Divide each LLP license's percentage by the sum of the percentages
of the harvest denominator. In order to properly scale the landings so
each LLP license is receiving a percentage of the harvest denominator,
each LLP license's percentage of the harvest denominator must be
divided by the sum of all percentages for all LLP licenses. This total
is the percentage of the sum of the harvest denominators for each LLP
license. This computation is shown in Line 7 for LLP A and in Line 8
for LLP B in Table 4.
Multiply the percentage of the sum of the percentages of the
harvest denominator by the initial QS pool. The amounts calculated in
Lines 7 and 8 are multiplied by the Initial QS Pool; in our example
9,000 QS Units. In the crab fisheries, NMFS would establish an initial
QS pool as a fixed amount. This fixed initial QS pool would be used to
initially distribute QS to recipients. If appeals are adjudicated, then
additional QS may be added to the QS pool, but the process for
determining how much QS a person would receive would be established
using the same procedure detailed in our example.
Establish the initial QS and PQS pools. The initial QS pool that
would be established in each of the eight crab fisheries is an amount
large enough so that, on initial issuance, a single unit of QS would
yield an annual amount of IFQ less than the average weight of one crab.
To achieve this, the initial QS pool for the eight crab QS fisheries
would be set at an amount of units equal to three times the highest
historical fishery harvest rounded to the nearest 10,000,000 units. The
Initial PQS pools are set at the same level as the initial QS pools for
ease of computation and to ensure that a single unit of PQS would yield
an annual amount of IPQ less than the average weight of one crab. The
Initial QS pools for all the crab fisheries using this method are shown
in the following table:

Table 5--Initial QS and PQS Pool for Each Crab Fishery
------------------------------------------------------------------------
Initial QS Pool Initial PQS Pool
------------------------------------------------------------------------
EAG -Eastern Aleutian 10,000,000 10,000,000
Islands golden king crab
------------------------------------------------------------------------
WAG -Western Aleutian 40,000,000 40,000,000
Islands golden king crab
------------------------------------------------------------------------
BST -Bering Sea Tanner 200,000,000 200,000,000
crab
------------------------------------------------------------------------
BSS -Bering Sea Snow Crab 1,000,000,000 1,000,000,000
------------------------------------------------------------------------
BBR -Bristol Bay red king 400,000,000 400,000,000
crab
------------------------------------------------------------------------
PIK -Pribilof Islands red 30,000,000 30,000,000
and blue king crab
------------------------------------------------------------------------
SMB -St. Matthew blue 30,000,000 30,000,000
king crab
------------------------------------------------------------------------
WAI -Western Aleutian 60,000,000 60,000,000
Islands red king crab
------------------------------------------------------------------------

The initial QS pools would be used for all four QS sectors. The
amount of QS initially issued as CVO and CPO QS sectors would be 97
percent of the total amount of QS, and the amount of QS initially
issued to the CVC and CPC QS sectors in any one fishery would be 3
percent of the initial QS pools. NMFS would implement this provision by
multiplying the amount of QS initially issued by either 97 percent for
the CVO and CPO QS sectors, or 3 percent for the CVC and CPC QS
sectors. The calculation showing the unadjusted allocation for LLP A is
shown in Line 10 of Table 4, and the adjusted amount for the CVO and
CPO QS sectors is shown in Line 12. The same

[[Page 63211]]

calculations for LLP B are shown in Lines 11 and 13.
Determine the amount of QS issued as CVO or CPO QS. The amount of
QS issued as CVO QS to each LLP license holder would be equal to the
percentage of landings delivered unprocessed, to a shorebased or
stationary floating processor. In our hypothetical example, the onshore
landings made by LLP A in each year are shown in Line 3A of Table 4.
The landings processed at-sea in each year are shown in Line 3B.
The italicized numbers are the years used in the initial QS
calculations because they represent the years with the highest
percentage of the total harvest denominator the best years for that LLP
license. The total shown in the last column of Line 3A and Line 3B is
the total of onshore landings for the best years only. In this case,
Year 3 is not used for LLP A. In order to calculate the percentage of
QS that would be issued as CVO QS for LLP A, NMFS would determine the
percentage of the landings that were landed on shore for each LLP
license applying to receive QS. In our example, for LLP A, the
percentage of landings delivered onshore is calculated in Line 3C. The
percentage calculated in Line 3C is then multiplied by the amount of QS
initially issued to LLP A, which is shown in Line 12. This calculation
is provided in Line 14 for LLP A. The amount of QS issued as CVO QS for
LLP B is determined by using the same methodology. Lines 5A, 5B, 5C,
and Line 16 show the same calculation for LLP B. Only landings that
were processed at-sea and that gave rise to an LLP license
endorsed for CP activity would be allocated CPO QS.

Determination of Regional Designation

Regional designation applies to most of the crab fisheries (see
Table 3 for regional designations). Regional designation does not apply
to QS initially issued to the CPO QS sector, but can apply to the CVO
QS sector. In our example, we assume there are two regions in the
hypothetical fishery: a North region and a South region. The percentage
of landings made in each region in each year under LLP A is shown in
Lines 3E and 3F. The percentages for LLP B are shown in Lines 5E and
5F. In order to calculate the amount of the CVO QS allocated to each
region, several additional steps must be taken depending on specific
conditions applicable to each LLP license holder.
LLP license holders with landings in only one region. If an LLP
license holder made landings in only one region, then all of the QS
issued would be for that region. That is the case for LLP A in our
hypothetical fishery example. As shown in Lines 3E and 3F, the amount
of landings that occurred in each region are shown in italics. Note the
landings processed at-sea are not assigned to a region. As shown
in the calculations Line 3G and 3H, 100 percent of the onshore landings
subject to regional designation for the years used were in the North
region.
LLP license holders with landings in more than one region. If an
LLP license holder received QS based on landings made in more than one
region, then a one-time additional adjustment in the designation of the
QS would be required to account for the issuance of PQS so the amount
of QS issued in a region is equal to the amount of PQS in that region.
In our hypothetical example, LLP B has qualified landings that would
result in QS for both the North and the South Region. Before that QS
could be issued, the relative distribution of PQS would need to be
determined. The initial issuance of QS for LLP B in the hypothetical
example will be explained after the processing sector initial
allocation has been discussed.

Other Provisions of Initial QS Issuance

Additional provisions would pertain to the issuance of QS: two
provisions for determining QS issuance to vessels that sank, and a
provision to allow a person to receive QS for landings made by a vessel
not used to qualify for a permanent, fully transferable LLP license
endorsed for that fishery.
Sunken vessels. Two provisions would apply to vessels that have
sunk. First, a person would receive 50 percent of their average legal
landings for the qualifying years unaffected by the sinking after the
time of sinking until that vessel was replaced under the provisions
established for vessel replacement under the LLP, at 50 CFR
679.4(k)(5)(v). This provision would apply if a person who owned a
vessel that sank, replaced that vessel under the LLP qualification
rules or after satisfying the LLP qualification requirements. This
provision also requires the owner of the vessel to replace the vessel
and begin fishing within a specified time period. As an example, if,
due to a sinking, a person's vessel was not operational in two of the
four qualifying years, that person would receive QS equal to 50 percent
of the average of the 2 years during which that vessel was operational
to be applied toward the 2 years the vessel was not operational. This
provision allows some compensation to LLP holders for some qualifying
years in which the LLP holder was prevented from participating due to
sinking.
The second sunken vessel provision would apply under circumstances
in which a person applying to receive an initial issuance of QS: (1)
was denied a request to replace the vessel under the provisions of
Public Law 106-554 (Consolidated Appropriations Act of 2001);
(2) replaced the vessel with a newly constructed vessel that began
construction by June 10, 2002; and (3) participated in any Bering Sea
crab fishery by October 31, 2002, with the replacement vessel. A newly
constructed vessel would be defined as one the keel of which was laid
by June 10, 2002. This provision is intended to accommodate a specific
circumstance in which a person delayed construction of a vessel based
on Public Law 106-554. Public Law 106-554 was in effect
for less than a year during late 2000 and part of 2001. Although the
law was in effect for less than a year, it may have hindered the
ability of a vessel owner to replace a vessel to participate in crab
fisheries and to make qualifying landings. This provision would allow a
person to receive QS equal to 50 percent of the average of the years
unaffected by the sinking.
For both of these provisions, the calculation methods for
determining the actual amount of QS issued would follow the same
methods shown earlier. The adjustment for sunken vessels would be made
when determining the amount of landings that would be attributed to the
LLP license used on board a vessel.
Interim LLP license history exemption. A key component of this
program is that QS is awarded based on the legal landing made on a
vessel that qualified for a permanent, fully transferable LLP license.
The Council recommended a limited provision that would allow a person
to apply to receive QS based on legal landings that were not used to
qualify for a permanent, fully transferable LLP license. Under this
provision, a person who applies to receive QS with an LLP license
endorsed for a fishery could choose to receive the QS based either on
the landings made by the vessel that was used to qualify for that LLP
license or on the landings made on another vessel. The intent of this
provision is to allow a vessel owner who had participated in a fishery
to use historical landings as long as a permanent, fully transferable
LLP license was transferred for use on that vessel after the qualifying
period.
An applicant for CVO or CPO QS who deployed a vessel in a crab
fishery under the authority of an interim LLP license and later
transferred a permanent, fully transferable LLP

[[Page 63212]]

license before January 1, 2002, for use in that crab fishery, to insure
that the vessel would remain authorized to participate in the fishery
following the invalidation of the interim LLP license, may choose to
use either: (1) the legal landings made on the vessel that gave rise to
the interim LLP license for that crab fishery prior to the transfer of
the permanent, fully transferable LLP license for use on that vessel;
or (2) the legal landings made on the vessel that gave rise to the
permanent, fully transferable LLP license and the legal landings made
under the authority of that LLP license in that crab fishery prior to
January 1, 2002. This exemption is meant to address a specific
circumstance in which a person may have participated in a fishery
legally, but required a permanent, fully transferable LLP license to
continue participating in the fishery. It is not intended to address
transfers of LLP licenses among persons that are undertaken for other
reasons. NMFS intends that this provision provide a limited exemption
and not a general opportunity to allow persons who voluntarily
transferred LLP licenses to choose a specific catch history that is
severable from the LLP license under which a person is applying to
receive QS. NMFS specifically requests public comment on this approach
relative to Council objectives (see ADDRESSES).

Computation of Initial Issuance of CVC and CPC QS

The method for calculating CVC and CPC QS is essentially the same
as the CPO and CVO QS, with some key differences. The first difference
is that, for these sectors, the harvest denominator would represent the
legal landings made by individuals under the authority of a State of
Alaska Interim Use Permit who met the recent participation eligibility
requirements. Second, the regional designations would be noted on the
QS, but would not be applied to the CVC QS until after July 1, 2008.
The regional designations are not shown in this example but would be
calculated in the same manner as that used for the CVO and CPO QS.
For illustration purposes, we will demonstrate the initial issuance
using the same hypothetical fishery. The issuance process is shown in
the following table (Table 6). As with the other example, we will
assume there are two crewmembers who are qualified to receive an
initial issuance of QS. The specific calculations are not detailed in
this example because they are the same as those described under the CVO
and CPO QS example. Note the total landings in Line 1 of Table 6 differ
from those in Table 4 (CVO and CPO QS) because the recency requirements
would exclude certain landings and, under the CVC and CPC QS
calculations, landings made legally on a vessel would be considered
even if those landings did not result in the issuance of an LLP license
for those landings. Additionally, the amount of QS issued to the CVC
and the CPC QS sectors is shown in Lines 12 and 13. The QS issued to
these sectors is equal to 3 percent of the QS pool.

Table 6--Hypothetical Crab Fishery - Best 3 of 4 Years Used - Calculation of Catcher Vessel Crew (CVC) and
Catcher Processor Crew (CPC) Quota Share (QS) Initial Issuance for State of Alaska Interim Use Permit Holders
----------------------------------------------------------------------------------------------------------------
Total for
Year 1 Year 2 Year 3 Year 4 Years Used
----------------------------------------------------------------------------------------------------------------
(1) Harvest Denominator in Fishery 1,000 lb 200 lb 1,000 lb 1,000 lb 3,200 lb
(Legal Landings)
----------------------------------------------------------------------------------------------------------------
(2) Total Legal Landings of Crew A 500 lb 20 lb 300 lb 500 lb 1,320 lb
----------------------------------------------------------------------------------------------------------------
(3) Percentage of Harvest 50 %
10 %
30 % 50 % 43.3 %
Denominator for Crew A (Used) (Used) (Used) (Used)
----------------------------------------------------------------------------------------------------------------
(3A) Total Landings Landed Onshore 500 10 200 300 1,000
for Crew A
----------------------------------------------------------------------------------------------------------------
(3B) Total Landings Processed At- 0 10 100 200 300
sea for Crew A
----------------------------------------------------------------------------------------------------------------
(3C) Percentage of Landings Landed on Shore for Crew A = (1,000 / (1,000 + 300)) = 76.92 %
----------------------------------------------------------------------------------------------------------------
(3D) Percentage of Landings Processed At-sea for Crew A = (300 / (1,000 + 300)) = 23.08 %
----------------------------------------------------------------------------------------------------------------
(4) Total Legal Landings of Crew B 500 lb 180 lb 700 lb 500 lb 1,880 lb
----------------------------------------------------------------------------------------------------------------
(5) Percentage of Harvest 50 %
90 %
70 % 50 % 70 %
Denominator for Crew B (Used) (Used) (Used) (Used)
----------------------------------------------------------------------------------------------------------------
(5A) Total Landings Landed Onshore 500 100 200 500 800
for Crew B
----------------------------------------------------------------------------------------------------------------
(5B) Total Landings Processed At- 0 80 500 0 580
sea for Crew B
----------------------------------------------------------------------------------------------------------------
(5C) Percentage of Landings Landed Onshore for Crew B = (800 / (800 + 580)) = 57.97 %
----------------------------------------------------------------------------------------------------------------
(5D) Percentage of Landings Processed At-sea for Crew B = (580 / (800 + 580)) = 42.03 %
----------------------------------------------------------------------------------------------------------------
(6) Sum of Percentage of Harvest Denominators for All Crew = Crew A 0.433 (Line 3) + Crew B 0.700 (Line 5) =
1.133 or 113.3 %
----------------------------------------------------------------------------------------------------------------
(7) Percentage of the Sum of the Percentage of the Harvest Denominator for Crew A = (0.433/1.133) = 0.3822 or
38.22 %
----------------------------------------------------------------------------------------------------------------
(8) Percentage of the Sum of the Percentage of the Harvest Denominator for Crew B = (0.700/1.133) = 0.6178 or
61.78 %
----------------------------------------------------------------------------------------------------------------

[[Page 63213]]

(9) Initial QS Pool = 9,000 Units
----------------------------------------------------------------------------------------------------------------
(10) Unadjusted Initial QS Allocation for Crew A = 38.22 %
x 9,000 = 3,440 QS Units
----------------------------------------------------------------------------------------------------------------
(11) Unadjusted Initial QS Allocation for Crew B = 61.78 %
x 9,000 = 5,560 Units
----------------------------------------------------------------------------------------------------------------
(12) Initial QS Allocation for Crew A = 3,440 QS Units x (0.03) = 103 QS Units
----------------------------------------------------------------------------------------------------------------
(13) Initial QS Allocation for Crew B = 5,560 QS Units x (0.03) = 167 QS Units
----------------------------------------------------------------------------------------------------------------
(14) Percentage of Crew A QS Allocation as CVC QS = 103 x 0.7692 (Line 3C) = 79 CVC QS Units
----------------------------------------------------------------------------------------------------------------
(15) Percentage of Crew A QS Allocation as CPC QS = 103 x 0.2308 (Line 3D) = 24 CPC QS Units
----------------------------------------------------------------------------------------------------------------
(16) Percentage of Crew B QS Allocation as CVC QS = 167 x 0.5797 (Line 5C) = 97 CVC QS Units
----------------------------------------------------------------------------------------------------------------
(17) Percentage of Crew B QS Allocation as CPC QS = 167 x 0.4203 (Line 5D) = 70 CPC QS Units
----------------------------------------------------------------------------------------------------------------

Under our example, if the QS issued to the CVO, CPO, CVC, and CPC
QS sectors is summed, then the total QS issued for all of the QS
recipients is equal to 9,000 units the initial QS pool (sum the total
from Lines 14 through 17 in both Table 4 and Table 6). The initial QS
pool would be issued to all successful applicants. Additional QS would
be issued to applicants who have a successful appeal of an initially
denied application. However, it is the initial QS pool that would be
used to determine the caps that apply to QS use. Those caps are
discussed below.

Processor Quota Share Allocation

A processing privilege, analogous to the harvest privilege
allocated to harvesters, would be allocated to processors. Qualified
processors would be allocated PQS in each crab fishery. PQS represents
an exclusive but revocable privilege to receive deliveries of a
specific portion of the annual TAC from a fishery.
PQS allocations would be based on processing history during a
specified qualifying period for each fishery. A processor's allocation
in a fishery would equal its share of all qualified pounds of crab
processed in the qualifying period (i.e., pounds processed by the
processor divided by a denominator that represents pounds processed by
all qualified processors). Unlike the QS allocation process, PQS is not
allocated using a ``best of'' years provision.
A person would be eligible to receive PQS if they are a: (1) U.S.
citizen, corporation, or partnership at the time of application; and
(2) legally processed any crab QS species during either 1998 or 1999.
In addition, the Council provided an exemption to this eligibility
requirement to accommodate long term participants in the fishery who
did not participate in 1998 or 1999. An applicant may receive QS if
that person had processed Bering Sea snow crab during each season from
1988 through 1997 and invested at least $1,000,000 in processing
equipment and facilities during the period from January 1, 1995,
through June 10, 2002. NMFS has interpreted this requirement to apply
from the period of January 1, 1995, through June 10, 2002, the time of
final Council action on this provision. This would limit the ability of
additional persons to claim eligibility under this provision. The date
of final Council action would provide a suitable period of time during
which to measure fiscal expenditures.
Under this proposed rule, a person who has acquired or retained
legal processing history through transfer by the express terms of a
written contract that clearly and unambiguously provides that the legal
processing history and rights, may apply for and receive PQS based on
that legal processing history. This provision would allow for the
transfer or retention of legal processing history prior to the
implementation of this program. This provision would apply only if the
person applying for PQS either: (1) legally processed any crab during
1998 or 1999 as demonstrated on the official crab rationalization
record; or (2) provides documentation of a contractual agreement for
the transfer or retention of the legal crab processing history for any
amount of any crab during 1998 or 1999, as demonstrated in the official
crab rationalization record.
This provision differs from the requirements established for QS
holders who must either have an LLP license or be named on a State of
Alaska Interim Use Permit in order to apply and receive QS. There is
not a licensing requirement that allows for the tracking of processing
history to specific persons. State of Alaska revenue codes, port codes,
and other identifying elements do not necessarily establish the
identity of a processor. Additionally, the Council recognized that
custom processing, in which one firm paid another to process crab at a
specific facility, or allowed the lease of its facility, did occur and
permitted those crab buyers to claim legal processing history and the
rights to apply for PQS in cases where documentation indicated that the
legal processing that occurred at a facility was conducted by someone
other than the buyer of the crab at the time.
Additionally, the Council's motion establishing a qualified person
could be interpreted to strictly limit the ability to apply for and
receive PQS only if the person who processed crab in 1998 or 1999, or
Bering Sea snow crab under the provisions provided above, applies, even
if the processing facility, history, and other rights have been
transferred to another person. This interpretation appears to narrowly
limit the Council's overall recommendation that PQS and IPQ are access
rights that may be acquired by a wide range of persons.
This interpretation of Council intent also appears to be consistent
with the ability to trade legal landings in the CVO and CPO QS sectors
prior to the initial issuance of QS. Legal landings, and the right to
apply for and receive CVO or CPO QS may be acquired by

[[Page 63214]]

persons who purchase the LLP license and the rights that transfer with
that LLP license prior to submitting an application for QS. This
provision would require that if legal processing history has been
transferred and retained that the basic qualification for eligibility
established by the Council, processing of any BSAI crab species in 1998
or 1999, must still be met.
In addition, these regulations would establish that if a person
applies to receive PQS, that person or that person's
successor-in-interest must exist at the time of
application for PQS. A former partner of a dissolved partnership or a
former shareholder of a dissolved corporation who would otherwise
qualify as a person may apply for PQS in proportion to his or her
ownership interest in the dissolved partnership or corporation.
Documentation of ownership interest in a dissolved partnership or
corporation, association, or other entity would be limited to corporate
documents (e.g., articles of incorporation) or notarized statements
signed by each former partner, shareholder or director, and specifying
their proportions of interest. These requirements are similar to those
used in the halibut and sablefish IFQ Program to establish who may
apply to receive QS under the Program. The provisions in this proposed
rule require that the person who received the crab and processed that
crab, or their successor-in-intererst, is a person who is
eligible to receive PQS.
The amount of PQS allocated to a person would be based on a record
of receiving and processing crab based on State of Alaska fish ticket
data during the qualifying years. Data from the State of Alaska fish
tickets concerning legal processing of crab would be presumed to be
correct unless other documentation is provided by the applicant.
However, allocations can be made to a buyer not recorded on a fish
ticket if the applicant can demonstrate that the entity that should
receive an allocation is someone other than the entity named on the
fish ticket. Proof of this eligibility can include data from the State
of Alaska Commercial Operators Annual Report, fish tax records, or
other documentation of direct payments to fishermen. This provision is
intended to address the custom processing arrangements. The following
table establishes the eligibility and qualifying years for receiving
PQS.

Table 7--PQS Eligibility and Qualifying Years
--------------------------------------------------------------------------------------------------------------------------------------------------------
Qualifying Year Periods for Determining PQS
Eligible Person to Receive PQS Crab Fisheries Allocation
--------------------------------------------------------------------------------------------------------------------------------------------------------
The person who legally processed the crab during the Eastern Aleutian Island golden king crab 4 years of the 4-year base period beginning
qualifying years and; (EAG) on:
(1) September 1, 1996, through December 25,
(1) is a US Citizen, corporation, or partnership; and 1996;
(2) September 1, 1997, though November 24,
(2) processed crab in 1998 or 1999; or 1997;
(3) September 1, 1998, through November 7,
(3) processed Bering Sea snow crab during 1988 through 1998;
1997 and invested at least $1,000,000 in processing (4) September 1, 1999, through October 25,
equipment and facilities during the period from January 1999.
1, 1995, through June 10, 2002.
---------------------------------------------------------------------------------------------
Western Aleutian Island golden king crab 4 years of the 4-year base period beginning
(WAG) on:
(1) September 1, 1996, through August 31,
1997;
(2) September 1, 1997, though August 31,
1998;
(3) September 1, 1998, through August 31,
1999;
(4) September 1, 1999, through August 14,
2000.
---------------------------------------------------------------------------------------------
Bering Sea Tanner crab (BST) Equivalent to 50 percent of the total legally
processed crab in the Bering Sea C. opilio
fishery during the qualifying years
established for the QS fishery; and 50
percent of the totally legally processed
crab in the Bristol Bay red king crab
fishery during the qualifying years
established for that crab QS fishery.
---------------------------------------------------------------------------------------------
Bering Sea snow crab (BSS) 3 years of the 3-year period beginning on:
(1) January 15, 1997, through March 21, 1997;
(2) January 15, 1998, through March 21, 1998;
and
(3) January 15, 1999, through March 22, 1999.
---------------------------------------------------------------------------------------------

[[Page 63215]]

Bristol Bay red king crab (BBR) 3 years of the 3-year QS base period
beginning on:
(1) November 1, 1997, through November 5,
1997;
(2) November 1, 1998, through November 6,
1998; and
(3) October 15, 1999, through October 20,
1999.
---------------------------------------------------------------------------------------------
Pribilof Islands red and blue king crab (PIK) 3 years of the 3-year period beginning on:
(1) September 15, 1996, through September 26,
1996;
(2) September 15, 1997, through September 29,
1997; and
(3) September 15, 1998, through September 28,
1998.
---------------------------------------------------------------------------------------------
St. Matthew blue king crab (SMB) 3 years of the 3-year period beginning on:
(1) September 15, 1996, through September 23,
1996;
(2) September 15, 1997, through September 22,
1997; and
(3) September 15, 1998, through September 26,
1998.
---------------------------------------------------------------------------------------------
Western Aleutian Islands red king crab (WAI) Equivalent to the total legally processed
crab in the Western Aleutian Islands golden
king crab fishery during the qualifying
years established for that crab QS fishery.
--------------------------------------------------------------------------------------------------------------------------------------------------------

In the Bering Sea Tanner crab fishery, the issuance of PQS would be
based on the processing history in the Bering Sea snow crab fishery.
The Bering Sea Tanner crab fishery has not been open in recent years
and, in the past, both Bering Sea snow crab and Bering Sea Tanner crab
were harvested together. In the Western Aleutian Islands red king crab,
the issuance of PQS would be based on the processing history in the
Western Aleutian golden king crab fishery. This provision recognizes
the fact there has been limited processing in these fisheries in recent
years and much of the participation is sporadic and conducted by
processing entities who have also been involved in the Western Aleutian
Islands red king crab fishery.

Computation of Initial Issuance of PQS

The amount of PQS that would initially be issued to any one person
would be based on the amount of legal processing by the person as a
percentage of a denominator that represents the total legal processing
by all persons eligible to receive PQS. The following steps would be
used to calculate PQS for an applicant.
NMFS would build the official crab rationalization record, which
would contain the total legal processing for all of the crab fisheries
based on the best available information by using the State of Alaska
fish ticket database. The official record is presumed to be correct
unless an applicant provides information that indicates a correction is
necessary. The total legal processing amount is the total processing
denominator (TPD).
In order to clearly explain the computation, the hypothetical
example used previously for the QS issuance is repeated here. This
example does not use data or persons from existing crab fisheries and
is intended for illustrative purposes only. In our example, there are
only two processors in the fishery: Processor A and Processor B, each
with different landings patterns. The total legal processing, the
region in which that processing occurred, and the amount of the
processing are shown in Table 8. The computation process using two
processors (A and B) is described in the table. Note this hypothetical
fishery also assumes all applicable years are used to determine an
initial issuance of PQS. As with all crab fisheries, the years used for
selecting processing history differ from those used to determine legal
landings for allocating QS. Because all years are used, the total
processing denominator is not divided by the sum of the percentage of
the processing denominator of all persons receiving PQS.
The percentage of the TPD for each person is multiplied by the
initial PQS pool, although the initial PQS pool does not need to be set
at the same number as the initial QS pool. NMFS would set both pools at
the same number for each crab fishery to facilitate ease of computation
for use limitations. In our hypothetical example, this means there
would be an initial QS pool of 9,000 units and an initial PQS pool of
9,000 units. Although the amount of IFQ a unit of QS yields and the
amount of IPQ a unit of PQS may yield would differ, the initial pools
of quota would be the same. See the following table for details:

[[Page 63216]]

Table 8--Hypothetical Crab Fishery - Four Years Used - Calculation of PQS Initial Issuance
----------------------------------------------------------------------------------------------------------------
Year 1 Year 2 Year 3 Year 4 Total
----------------------------------------------------------------------------------------------------------------
(1) Total Processing Denominator 1,800 lb 400 lb 1,000 lb 1,000 lb 4,200 lb
in Fishery (Legal Processing)
----------------------------------------------------------------------------------------------------------------
(2) Total Legal Processing of 600 lb 200 lb 300 lb 500 lb 1,600 lb
Processor A
----------------------------------------------------------------------------------------------------------------
(3) Percentage of Total Harvest 33.3 %
50 %
30 % 50 % 40.8 %
Denominator for Processor A (Used) (Used) (Used) (Used) (Used)
----------------------------------------------------------------------------------------------------------------
(3A) Total Landings in the North 100 0 100 200 400
Region for Processor A
----------------------------------------------------------------------------------------------------------------
(3B) Total Landings in the South 500 200 200 300 1,200
Region for Processor A
----------------------------------------------------------------------------------------------------------------
(3C) Percentage of Processing in the North Region for Processor A = (400 / (400 + 1,200)) = 25.00 %
----------------------------------------------------------------------------------------------------------------
(3D) Percentage of Processing in the South Region for Processor A = (1,200 / (400 + 1,200)) = 75.00 %
----------------------------------------------------------------------------------------------------------------
(4) Total Legal Processing of 1,200 lb 200 lb 700 lb 500 lb 2,600 lb
Processor B
----------------------------------------------------------------------------------------------------------------
(5) Percentage of Total Processing 66.7 %
50 %
70 % 50 % 59.2 %
Denominator for Processor B (Used) (Used) (Used) (Used)
----------------------------------------------------------------------------------------------------------------
(5A) Total Processing in the North 900 100 500 0 1,500
Region for Processor A
----------------------------------------------------------------------------------------------------------------
(5B) Total Landings in the South 300 100 200 500 1,100
Region for Processor B
----------------------------------------------------------------------------------------------------------------
(5C) Percentage of Processing in the North Region for Processor B = (1,500 / (1,500 + 1,100)) = 57.69 %
----------------------------------------------------------------------------------------------------------------
(5D) Percentage of Processing in the South Region for Processor B = (1,100 / (1,500 + 1,100)) = 42.31 %
----------------------------------------------------------------------------------------------------------------
(6) Sum of Percentage of Total Processing Denominators for All Processors = Processor A 0.408 ( Line 3) +
Processor B 0.592 (Line 5) = 1.00 or 100 %--NO SCALING FACTOR REQUIRED
----------------------------------------------------------------------------------------------------------------
(7) Initial PQS Pool = 9,000 Units
----------------------------------------------------------------------------------------------------------------
(8) Initial PQS Allocation for Processor A = 9,000 PQS Units x 0.408 (Line 3) = 3,672 PQS Units
----------------------------------------------------------------------------------------------------------------
(9) Initial PQS Allocation for Processor B = 9,000 PQS Units x 0.592 (Line 5) = 5,328 PQS Units
----------------------------------------------------------------------------------------------------------------
(10) Percentage of Processor A PQS allocation as North Region PQS = 3,672 x 0.2500 (Line 3C) = 918 PQS Units
----------------------------------------------------------------------------------------------------------------
(11) Percentage of Processor A PQS allocation as South Region PQS = 3,672 x 0.7500 (Line 3D) = 2,754 PQS Units
----------------------------------------------------------------------------------------------------------------
(12) Percentage of Processor B PQS allocation as North Region PQS = 5,328 x 0.5769 (Line 5C) = 3,074 PQS Units
----------------------------------------------------------------------------------------------------------------
(13) Percentage of Processor A PQS allocation as South Region PQS = 5,328 x 0.4231 (Line 5D) = 2,254 PQS Units
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------

Regional Designations of PQS

PQS is issued with the same regional designations as those of QS as
described in Table 3.
Regional Adjustment for North and South Designations. North and
South PQS regional designation is based on the location of the legal
processing that is used as the basis for PQS allocation, as shown in
Table 8. Once PQS is issued with regional designation, the issuance of
QS would be adjusted so that the regional designations for QS would
match the regional designations for PQS in each crab fishery. The
adjustment would be made to the QS issued because the processing
facilities are typically fixed shorebased plants. The adjustments to
establish the same regional designation ratios is necessary to ensure
matches in the amounts of IPQ and IFQ that are harvested and delivered
in any one region.
This adjustment process would be made prior to the issuance of the
QS and PQS. The ratio between the regions should be the same even if
the number of QS units differs. Using our hypothetical fishery example,
we illustrate this process by showing how each LLP license holder's QS
allocation would be adjusted at initial allocation. Drawing on
information from Table 4 and Table 6, the calculation is shown in the
following table:

Table 9--Adjustment for North and South Regional Designation for QS
------------------------------------------------------------------------

-------------------------------------------------------------------------
(1) Percentage of Landings in the North Region for LLP A = 100 %
(Line 3G of Table 4) of 1,984 QS Units (Line 14 of Table 4) = 1,984 QS
Units
------------------------------------------------------------------------
(2) Percentage of Landings in the South Region for LLP A = 0 %
(Line 3H of Table 4) of 1,984 QS Units (Line 14 of Table 4) = 0 QS
Units
------------------------------------------------------------------------

[[Page 63217]]

(3) Percentage of Landings in the North Region for LLP B = 56.52
%
(Line 5G of Table 4) of 3,708 QS Units (Line 16 of Table 4) =
2,096 QS Units
------------------------------------------------------------------------
(4) Percentage of Landings in the South Region for LLP B = 43.48
%
(Line 5H of Table 4) of 3,708 QS Units (Line 16 of Table 4) =
1,612 QS Units
------------------------------------------------------------------------
(5) Total QS (Sum of Lines 1-4) = 5,692 Units
------------------------------------------------------------------------
(6) Total QS in North Region (Sum Lines 1 and 3) = 4,080 Units
------------------------------------------------------------------------
(7) Total QS in South Region (Sum Lines 2 and 4) = 1,612 Units
------------------------------------------------------------------------
(8) Percentage of North QS to South QS = 4,080/5,692 = 71.68 %
North 1,612/5,692 = 28.32 %
South
------------------------------------------------------------------------
(9) QS issued as North Region only = 1,984 Units (Line 1)
------------------------------------------------------------------------
(10) QS as both North and South Region = (Line 5 - Line 1) = 3,708 Units
------------------------------------------------------------------------
(11) Percentage of Processing in the North Region for Processor A =
25.00 %
(Line 3C of Table 8) of 3,672 Units (Line 8 of Table 8)
= 918 Units
------------------------------------------------------------------------
(12) Percentage of Processing in the South Region for Processor A =
75.00 %
(Line 3D of Table 8) of 3,672 Units (Line 8 of Table 8)
= 2,754 Units
------------------------------------------------------------------------
(13) Percentage of Processing in the North Region for Processor B =
57.69 %
(Line 5C of Table 8) of 5,328 Units (Line 9 of Table 8)
= 3,074 Units
------------------------------------------------------------------------
(14) Percentage of Processing in the South Region for Processor B =
42.31 %
(Line 5D of Table 8) of 5,328 Units (Line 9 of Table 8)
= 2,254 Units
------------------------------------------------------------------------
(15) Total PQS in North Region = 3,992 Units (Sum of Line 11 and 13)
------------------------------------------------------------------------
(16) Total PQS in South Region = 5,008 Units (Sum of Line 12 and 14)
------------------------------------------------------------------------
(17) Ratio of North PQS : South PQS = 44.36%
North, 55.64
%
South
------------------------------------------------------------------------
Calculations: (a) QS North Region = Total QS 5,692 (Line 5) x
44.38%
(Line 17) = 2,525 Units
------------------------------------------------------------------------
(b) QS South Region = Total QS 5,692 (Line 5) x 55.64 %
(Line 17)
= 3,167 Units
------------------------------------------------------------------------
(c) QS North Region for all persons holding North Region and South
Region QS = QS North Region - North Region only QS 2,525 Units - 1,984
(Line 9) Units = 541 Units
------------------------------------------------------------------------
(d) QS South Region for all persons holding North Region and South
Region QS = QS South Region - South Region only QS 3,167 Units - 0
Units = 3,167 Units
------------------------------------------------------------------------
(e) North Region QS issued to LLP A = 1,984 QS Units
------------------------------------------------------------------------
(f) North Region QS issued to LLP B = Total QS held by LLP B (3,708) x
541 Units/3,708 Units = 541 North Region QS Units
------------------------------------------------------------------------
(g) South Region QS issued to LLP B = Total QS held by LLP B (3,708) -
541 North Region QS Units = 3,167 South Region QS Units
------------------------------------------------------------------------

In this example, only one of the LLP license holders holds QS that
would require adjustment. Although CVC QS is not subject to regional
delivery requirements until after July 1, 2008, NMFS would compute the
amount of QS designated for each region prior to the issuance of the
CVC QS. This would allow a holder of CVC QS to know the regional
designation of the QS prior to the application of that designation. The
ratio of North and South regional designation would be the same for
both the CVO and CVC QS.
The adjustment for regional designation would need to occur once
appeals are decided and those readjustments in regional designation
would be made prior to fishing to minimize disruptions in the fishery.
A person who would receive QS with more than one regional designation
for that crab fishery would have his or her QS holdings regionally
adjusted on a pro rata basis according to the following process:
(1) Determine the ratio of the initial PQS pool in the North and
South regions.
(2) Multiply Initial QS pool by the ratio of North and South PQS.
This would yield the target North QS pool and the target South QS pool.
(3) Sum the QS for all persons who are eligible to receive North
QS. This is the unadjusted North QS pool.
(4) Repeat the procedure for the South Region. This is the
unadjusted South QS pool.
(5) Subtract the amount of QS for persons receiving North QS only
from the unadjusted North QS pool to calculate the amount of North QS
available to all persons holding both North and South region QS.
(6) Subtract the amount of QS for persons receiving South QS only
from the unadjusted South QS pool to calculate the amount of South QS
available to all persons holding both North and South region QS.
(7) Subtract the Unadjusted North QS pool from the Target North QS
pool to calculate the number of QS units that would be applied to the
North QS pool to adjust the regional designations. This amount is the
Adjustment Amount.
(8) Divide the Adjustment Amount by the unadjusted North QS pool
for North and South QS holders. This yields the regional adjustment
factor (RAF) for each person.
(9) For each person who holds both North and South Region QS, the
QS adjustment (QS Adj. p) to that person's Unadjusted North QS is
expressed in the following equation as:
QS adj. p = Unadjusted North QS p x RAF
(10) If the QS adjustment for a person is negative, the QS
adjustment for that person is subtracted from that person's unadjusted
North QS amount and added to that person's unadjusted South QS. If the
QS adjustment for a person is positive, the QS adjustment for that
person is added to that person's unadjusted North QS amount and
subtracted from that person's unadjusted South QS. These adjustments
would yield the regional amount of QS for that person.
Regional Adjustment in the Western Aleutian Islands Golden King
Crab Fishery. The PQS issued would need to be adjusted so that 50
percent of the PQS is designated as West region, and 50 percent is
undesignated. However, the process for regionally allocating PQS

[[Page 63218]]

in the Western Aleutian Islands golden king crab fishery differs
slightly from the North and South PQS regional designation, which is
based on the location of the legal processing. Fifty percent of the PQS
that would be issued in the Western Aleutian Islands golden king crab
fishery would be issued with a West designation. The West designation
applies to PQS for processing west of a line at 174[deg]
W. long. The
remaining 50 percent of the PQS issued for this fishery is undesignated
region PQS.
If a person owns a crab processing facility that is located in the
West region at the time of application, that person would receive West
PQS only. If a person applies to receive PQS and does not own a crab
processing facility located in the West region at the time of
application, then that person would receive West region (West) and
Undesignated region (Und.) PQS. Expressed algebraically, for any person
(p) allocated both West region PQS and undesignated region PQS the
formula is as follows:
(1) PQS_West = PQS x 0.50
(2) PQS_Und. = PQS x 0.50
(3) PQS_West for PQS_West!&!Und. holders =
PQS_West - PQS_West!only(4) PQS_West for Person_p = PQS_p
x (PQS_West for PQS_West!&!Und.) holders/
(PQS_West for PQS_West!&!Und. holders +
PQS_Und)
(5) PQS_Und. for Person_p = PQS_p
-PQS_West for Person_pFor purposes of the allocation of PQS in the Western Aleutian
Islands golden king crab fishery, ownership of a processing facility is
defined as a sole proprietor, or a relationship between 2 or more
entities in which a person directly or indirectly owns a
10-percent or greater interest in the facility. A processing
facility is defined as a shorebased, or stationary floating processor.
Catcher/Processors would not be considered as ownership of a processing
facility operating in the West region.
The QS issued to the Western Aleutian Islands golden king crab
fishery is adjusted so 50 percent of the QS issued is West QS, which
can be delivered only to an RCR located west of the 174[deg]
W.
longitude. The adjustment in the initial issuance of QS would be made
for persons who made landings of Western Aleutian Islands golden king
crab west and east of 174[deg]
W. longitude.
If a person received QS based solely on landings made east of
174[deg]
W. longitude, all of that QS would be issued to that person as
regionally undesignated QS. If a person received QS based on landings
made only west of 174[deg]
W. longitude, all of that QS would be issued
as West QS. However, if a person received QS based on landings made
both east and west of the 174[deg]
W. longitude line, then, that QS
would be issued such that a portion of the QS would be issued as
``Undesignated'' and a portion as ``West'' so that all of the QS issued
in the Western Aleutian Islands golden king crab fishery are issued
with a 50 percent West and a 50 percent Undesignated ratio. Person's
receiving QS with both regional designations would have the QS
pro-rated so the total of all QS is issued initially as 50
percent West and 50 percent Undesignated QS. The following process
would be followed:
(1) Sum the QS for all persons who are eligible to receive West QS.
This is the unadjusted West QS pool;
(2) Sum the QS for all persons who are eligible to receive
Undesignated QS. This is the unadjusted Undesignated QS pool;
(3) Subtract the amount of QS for persons receiving West QS only
from the unadjusted West QS pool to calculate the amount of West QS
available to all persons holding both West and Undesignated region QS;
(4) Subtract the amount of QS for persons receiving Undesignated QS
only from the unadjusted Undesignated QS pool to calculate the amount
of Undesignated QS available to all persons holding both West and
Undesignated region QS;
(5) Subtract the Unadjusted West QS pool from the Target West QS
pool to calculate the number of QS units that would be applied to the
West QS pool to adjust the regional designations. This amount is the
Adjustment Amount;
(6) Divide the Adjustment Amount by the unadjusted QS pool for West
and Undesignated QS holders. This yields the regional adjustment factor
(RAF) for each person;
(7) For each person who holds both unadjusted West and Undesignated
Region QS, the QS adjustment to that person's Unadjusted West QS is
determined by multiplying the Unadjusted West QS by the RAF; and
(8) If the QS adjustment for person is negative, the QS adjustment
for that person is added to that person's unadjusted West QS amount and
subtracted from that person's unadjusted Undesignated QS. If the QS
adjustment for a person is positive, the QS adjustment for that person
is subtracted from that person's unadjusted West QS amount and added to
that person's unadjusted Undesignated QS. These adjustments would yield
the regional adjustment amounts for that person.

Initial Issuance of Crab QS and PQS

In order to receive an initial allocation of QS or PQS, an eligible
person would need to submit an Application for Crab QS or PQS. The
application would be sent to the last known address of a person
identified as an eligible applicant by the official crab
rationalization record and would be available on the NMFS Alaska Region
web page at http://www.fakr.noaa.gov . All applications would
haveto be submitted by the close of the application period. The
application period would be specified in the Federal Register at the
time of the publication of the Final Rule. Applications could be mailed,
faxed, or hand delivered to the NMFS, Alaska Region (see ADDRESSES).
The contents of the application vary, depending on the type of QS and/
or PQS for which a person is applying. If an applicant is applying as the
successor-in-interest to an eligible applicant, an
application must also contain valid documentation demonstrating the
applicant's status as a successor-in-interest to that
eligible applicant.
An Application for Crab QS or PQS would be signed by the applicant
or the individual representing the applicant and would contain the
necessary information to identify the person applying, the basis for
applying for QS or PQS, any necessary information on the vessel or
processor, documentation of crew participation, contract provisions for
community ROFR, and any other information deemed necessary by the
Regional Administrator.
Additional requirements in the Application for Crab QS or PQS exist
for persons applying to receive PQS from legal landings made in an ECC,
or in a community in the GOA north of a line at 56[deg]20' N. latitude
-- a North GOA Community. Prior to the initial issuance of PQS based on
legal processing located in an ECC, that person must provide
documentation he or she has completed a contract with the entity
representing the ECC that sets out the terms for ROFR for any PQS to be
transferred in a future sale. In the case of a North GOA Community, a
ROFR contract must be signed with the City of Kodiak and the Kodiak
Island Borough.
The Regional Administrator would evaluate Applications for QS and
PQS submitted during the specified application period and compare all
claims in the application with the information in the official crab
rationalization record. Claims in the application consistent with
information in the official record would be accepted by the Regional
Administrator.

[[Page 63219]]

Inconsistent claims in the application, unless verified by
documentation, would not be accepted.
If NMFS determines the additional information or documentation
submitted by the applicant is correct and supports the applicant's
burden of proving the inconsistent claims, the information would be
used to determine whether the applicant is eligible for a QS or PQS
allocation. However, if the Regional Administrator determines the
additional information or documentation does not support the
applicant's burden, the applicant would be notified through an initial
administrative determination (IAD), stating the applicant did not meet
the burden of proof.
NMFS would specify a 30-day evidentiary period during which
an applicant may provide additional information or documentation to
support the claims made in his or her application. An applicant would
be limited to one 30-day evidentiary period per application.
Additional information or documentation, or a revised application,
received after the 30-day evidentiary period, but before an IAD
is issued, would be considered.
NMFS would prepare and send an IAD to the applicant following the
expiration of the 30-day evidentiary period if sufficient
documentation is not provided. The IAD would indicate the deficiencies
in the application. The IAD would also indicate which claims cannot be
approved based on the available information or documentation. An
applicant who receives an IAD may appeal. An applicant who avails
himself or herself of the opportunity to appeal an IAD would not
receive the QS or PQS being contested.
NMFS would not initiate an IAD in the case of an Application for
Crab QS or PQS that is complete except for a signed ROFR contract. This
provision would accommodate applicants who have complied with the
application requirements with the exception of a mutually signed
contract which relies on agreement of both parties. Once an application
is submitted with a ROFR contract, NMFS would allocate PQS to that
person.

IFQ Issuance

The annual allocations of the TAC, in pounds, to QS holders are
referred to as IFQ. IFQ would be issued for each of the four QS
sectors. IFQ is a permit that allows the harvesting of an amount of the
TAC for a fishery. As with QS, IFQ would be issued on a
fishery-by-fishery and regional basis.
IFQ would be issued once the TAC for that crab fishery in that crab
fishing year has been specified by the State of Alaska. The TAC
available as IFQ would be the fishery TAC minus the 10 percent CDQ
allocation. For the Western Aleutian Islands golden king crab fishery,
the 10 Adak allocation would be deducted from the TAC prior to
allocating the IFQ. All IFQ would be issued for a crab fishing year.
QS issued after NMFS has issued annual IFQ would not result in IFQ
for that crab fishery for that fishing year. If additional actions such
as appeals, or other administrative decisions occur after IFQ has been
issued for that fishery, the person would not receive IFQ until the
following year. This single annual issuance is required for
administrative purposes so that mid-year adjustments to other
IFQ holders would not occur that would alter their allocation or the
ratio of QS to IFQ for that year.
The account of the person holding IPQ would be debited as soon as
the landings are reported. A person would be prohibited from harvesting
an amount of crab in excess of the IFQ held. Penalties would be imposed
for any overage in excess of a person's IFQ. The IFQ is subject to use
provisions described later in this preamble. Descriptions of the types
of IFQ resulting from each type of QS follow.

CVO IFQ

CVO QS yields two separate classes of IFQ: Class A IFQ and Class B
IFQ. Class A IFQ limits the delivery of any crab harvested with that
IFQ to an RCR holding unused IPQ with a specific regional designation.
Class B IFQ could be delivered to any RCR, except to an RCR that has
already used CPO or CPC IFQ in that crab fishery during that season.
Class B IFQ would not be regionally designated.
The Class A/Class B IFQ distinction would be made only in the
annual IFQ allocations. QS would be issued in a single class. Since the
Class B IFQ are intended to provide negotiating leverage to harvesters
who are unaffiliated with holders of PQS or IPQ, only QS holders who do
not also hold PQS or who are unaffiliated with holders of PQS, would
receive Class B IFQ. Holders of PQS or IPQ and their affiliates who
hold QS would be allocated Class A IFQ for all of their QS holdings.
For each region of each fishery, the allocation of Class B IFQ would be
10 percent of the total allocation of IFQ. For example, if no North QS
holders are affiliated with PQS or IPQ holders, each IFQ allocation
would be 90 percent North Class A IFQ and 10 percent Class B IFQ. If
half of the North QS is held by persons affiliated with a PQS or IPQ
holder, the holders of North QS who are not affiliated with a PQS or
IPQ holder would receive 80 percent Class A IFQ and 20 percent Class B
IFQ. The result would be that 10 percent of the total North IFQ in the
fishery would be Class B IFQ. The absence of an affiliation with a
holder of PQS or IPQ would be established by a harvester filing an
annual affidavit stating the use of any IFQ held by that harvester is
not subject to any control of any holder of PQS or IPQ.
Persons who hold CVO IFQ and also hold PQS or IPQ would receive
only Class A IFQ. Persons who hold CVO IFQ and are affiliated with a
person who holds PQS or IPQ would receive only Class A IFQ. Affiliation
would be determined based on two factors: ownership and control. IFQ
would be considered to be held by a processor if a PQS or IPQ holder
directly or indirectly owns at least 10 percent of an entity who holds
or receives IFQ. This 10 percent ownership standard has been used in
other rationalization programs in the past as a means of measuring
ownership and comports with the mechanism employed to measure common
ownership for purposes of QS use caps. The definition of affiliation
used in this proposed rule is similar to that developed for the AFA
regulations, and is consistent with Council intent.
Examples of the affiliation rule follow: First, if a PQS or IPQ
holder also held QS and received IFQ, that IFQ would be considered to
be affiliated and issued as Class A IFQ; second, if a PQS or IPQ holder
owned 50 percent of Corporation A and Corporation A owned 50 percent of
Corporation B, which received IFQ, that IFQ would be considered to be
affiliated with a processor because that PQS or IPQ holder indirectly
owns 25 percent of Corporation B, which is receiving the IFQ; third, if
a PQS or IPQ holder owned 20 percent of Corporation C and Corporation C
owned 20 percent of Corporation D, which received IFQ, that IFQ would
not be considered affiliated because the PQS or IPQ older indirectly
owns only 4 percent of Corporation D; therefore, both Class A and Class
B IFQ would be issued to Corporation D.
Control of IFQ by a PQS or IPQ holder would be measured by linkages
between the PQS or IPQ holder and the IFQ holder and would serve as a
means of effectively extending the ability of the PQS or IPQ holder to
control the deliveries of crab to a specific processor. NMFS would
interpret control in situations in which the person holding PQS or IPQ:
Control exists if an individual, corporation, or other business entity
that holds PQS controls a 10 percent or greater interest in the

[[Page 63220]]

IFQ holder. An entity controls a 10 percent or greater interest in a
second entity if the first entity: (1) Controls a 10 percent ownership
share of the second entity, or (2) Controls 10 percent or more of the
voting stock of the second entity. In addition to this direct form of
control, affiliation would also include other means whereby an entity
otherwise controls another entity.
An entity otherwise controls another when the first entity has the
power to exercise a controlling influence over the management or
policies of the other entity, unless such power is solely the result of
an official position with such entity. This definition is drawn from
the Investment Company Act of 1940. This definition is intended to
incorporate all forms of control. Examples of the types of control that
may be encompassed by this definition, include the authority to direct
the delivery of crab harvested under an IFQ permit held by the second
entity to a specific RCR, or when one entity absorbs the majority of
costs and normal business risks associated with the operation of a
second entity, including the costs associated with obtaining and using
any amount of the QS, PQS, IFQ, or IPQ held by the second entity.
NMFS would require QS holders to submit an affidavit on an annual
basis, along with the Annual Application for Crab IFQ/IPQ Permit, to
attest to whether an affiliation exists between a PQS or IPQ holder and
the IFQ recipient.
The Regional Administrator would determine the amount of Class A
and Class B IFQ that is issued to a QS holder. This is calculated by
allocating 90 percent of the TAC (TAC a) as Class A IFQ. A portion of
TAC a is allocated to persons eligible to hold only Class A IFQ (TAC a
only), the remaining TAC (TAC r) is allocated for harvest by a person
(p) eligible to receive both Class A IFQ and Class B IFQ. Expressed
algebraically, for an individual person (p) eligible to hold both Class
A and Class B IFQ the annual allocation formula is as follows:
1. TAC_a = TAC x 0.90
2. TAC_r = TAC_a - TAC_a!only3. IFQ_ap = TAC_r / (TAC - TAC_a
!only) x IFQ_p4. IFQ_bp = IFQ_p - IFQ_apCPO IFQ

CPO QS yields only one class of IFQ, CPO IFQ. This IFQ allows the
harvest and processing of an amount of crab. The person holding CPO IFQ
can choose to harvest an amount of crab and process it on board that
same vessel. Alternatively, the CPO IFQ holder can harvest crab and
deliver the crab to a separate RCR. CPO IFQ is not subject to regional
restrictions while used as CPO IFQ.

CVC IFQ

CVC QS yields CVC IFQ. CVC IFQ would not be subject to regional
designation until July 1, 2008. After July 1, 2008, CVC IFQ would be
issued as Class A and Class B IFQ, subject to the same regional
designation and affiliation requirements as those described under CVO
IFQ.

CPC IFQ

CPC QS yields CPC IFQ. As with CPO IFQ, there are no regional
delivery requirements, and crab harvested using a CPC IFQ can be
harvested and processed on board a vessel, or it can be delivered to
another RCR. Unlike CVC IFQ, CPC IFQ would not convert to Class A and
Class B shares annually starting July 1, 2008.

IPQ Issuance

An annual allocation of PQS is referred to as IPQ and expressed in
pounds of crab. IPQ would be equivalent to the amount of the TAC that
is issued as Class A IFQ for that crab fishery. Processor privileges do
not apply to the amount of the TAC allocated as Class B IFQ, or prior
to July 1, 2008, allocated for use by the CPO and CPC sectors. IPQs
would be regionally designated for processing with the same regional
designations that apply to IFQ. The account of the person holding IPQ
would be debited as soon as the landings are reported.

Annual Application for Crab IFQ/IPQ Permit

Prior to the issuance of IFQ or IPQ for a crab fishery, each person
that wishes to receive IFQ or IPQ must submit an Annual Application for
Crab IFQ/IPQ Permit. This application is necessary for NMFS to
administer several aspects of this program, specifically: (1) to
determine the designation of Class A and Class B IFQ in each crab
fishing year for each person based on the affidavit; (2) to determine
whether the applicant would be using the IFQ as part of a crab
harvesting cooperative; and (3) to ensure that an EDR has been
submitted, if required. This application must be submitted prior to the
start of the crab fishing year.
A complete Annual Application for Crab IFQ/IPQ Permit would include
the applicant's identification and contact information, whether the
applicant has joined a crab cooperative, and a completed affidavit of
affiliation declaring any and all affiliations with any PQS or IPQ
holder. An affidavit of affiliation would include the applicant's
relationships with IPQ or PQS holders that may involve direct or
indirect ownership or control of the delivery of IFQ and any
supplemental documentation deemed necessary by NMFS to determine
whether an affiliation exists. This includes the names of all persons,
to the individual level, holding an ownership interest in the entity
and the percentage ownership each person holds. The application must
also include the submission of an EDR, and pay any outstanding fees, if
required.
As with the other permit applications, NMFS would review the
application for completeness, payment of any fees required under this
program, and other provisions required for permit holders.

QS/IFQ and PQS/IFQ Transfer Provisions

After the initial allocation of QS and PQS, these shares and their
corresponding IFQ and IPQ, may be transferred. All transfers must be
approved by NMFS. A transfer is any change in the person holding the QS
or using the IFQ, permanently or for a fixed period of time. IFQ used
by a person holding a Crab IFQ Hired Master Permit issued by NMFS, and
the use of IFQ assigned to a crab harvesting cooperative and used
within that cooperative, are not considered to be transfers of IFQ.

Eligibility to Transfer Quota

Before receiving quota by transfer quota, a person must establish
eligibility to receive QS, PQS, IFQ, or IPQ by transfer by submitting a
completed Application for Eligibility to Receive QS/IFQ or PQS/IPQ by
Transfer, available on the NMFS Alaska Region website at
http://www.fakr.noaa.gov , or from the NMFS Alaska Region
(see ADDRESSES). If a person is an initial issuee of QS, an eligibility
application is not required. To be eligible to receive QS, PQS, IFQ, or
IPQ by transfer, a person must first meet the requirements in the
following table:

[[Page 63221]]

Table 10--Eligibility Requirements to Receive Quota by Transfer
------------------------------------------------------------------------
Eligibility
Quota Type Eligible Person Requirements
------------------------------------------------------------------------
PQS Any person None
------------------------------------------------------------------------
IPQ Any person None
------------------------------------------------------------------------
CVO or CPO QS A person None
initially issued
QS
------------------------------------------------------------------------
An individual who is a U.S.
citizen with at
least 150 days
of sea time as
part of a
harvesting crew
in any U.S.
commercial
fishery
------------------------------------------------------------------------
A corporation, with at least on
partnership, or individual
other entity member who is a
U.S. citizen
and who:
(1) owns at
least 20
percent of the
corporation,
partnership, or
other entity;
and
(2) has at least
150 days of sea
time as part of
a harvesting
crew in any
U.S. commercial
fishery
------------------------------------------------------------------------
An ECCO None
------------------------------------------------------------------------
A CDQ Group None
------------------------------------------------------------------------
CVO or CPO IFQ All persons Same as the
eligible for CVO requirements
or CPO QS for CVO and CPO
QS
------------------------------------------------------------------------
A crab harvesting None
cooperative
------------------------------------------------------------------------
CVC or CPC QS An individual None
initially issued
QS
------------------------------------------------------------------------
An individual who is a U.S.
citizen with:
(1) at least 150
days of sea
time as part of
a harvesting
crew in any
U.S. commercial
fishery; and
(2) recent
participation
in the 365 days
prior to the
transfer.
------------------------------------------------------------------------
CVC or CPC IFQ All persons Same as the
eligible for CVC requirements
or CPC QS for CVC and CPC
QS
------------------------------------------------------------------------
A crab harvesting None
cooperative
------------------------------------------------------------------------

Prior to receiving QS by transfer on behalf of a specific ECC, a
non-profit entity that intends to represent that ECC as an ECCO
must have approval from the Regional Administrator. To receive
approval, the non-profit entity seeking to become an ECCO must
submit a complete Application to Become an ECCO to NMFS, available on
the NMFS Alaska Region website at http://www.fakr.noaa.gov , or
from the NMFS Alaska Region (see ADDRESSES). If an application is
disapproved, then the determination may be appealed.
An ECCO is a non-profit organization that is authorized to
hold QS and lease the resulting IFQ to residents of the ECC on whose
behalf it holds the QS. Each ECC would have to designate an ECCO to
transfer and hold QS on its behalf. The ECCO would be identified by
either the CDQ group, or the municipality in which the ECC is located,
except in cases where the ECC is also located in a borough. In such
case, the municipality and borough must agree to designate the same
non-profit organization to serve as the ECCO. Each ECC may
designate only one ECCO to hold crab QS on behalf of that community at
any one time.
A complete Application to Become an ECCO consists of: (1) The
articles of incorporation under the laws of the State of Alaska for
that non-profit entity; (2) A statement indicating the ECC
represented by that non-profit entity for purposes of holding
QS; (3) Management organization information; and (4) A statement
describing the procedures that would be used to determine the
distribution of IFQ to residents of the community represented by that
ECCO.

Transfer Applications

Once an eligibility application is submitted, and eligibility to
receive QS, PQS, IPQ, or IFQ is established, a transfer application
must be submitted to NMFS for the actual transfer of a specific type of
quota. There are three forms of transfer applications and the
application form used would vary depending on the person applying for
the transfer. The three forms are: (1) Application for Transfer of Crab
QS/IFQ or PQS/IPQ. This application is required to transfer any amount
of QS, PQS, IFQ, or IPQ from an entity that is not an ECCO or a crab
harvesting cooperative; (2) Application for Transfer of Crab QS/IFQ to
or from an ECCO. This application is required to transfer any amount of
QS or IFQ to or from an entity that is an ECCO; or (3) Application for
Inter-cooperative Transfer. This application is required to
transfer any amount of IFQ from a crab harvesting cooperative to
another crab harvesting cooperative. All of these transfer forms would
be available on the NMFS Alaska Region website at
http://www.fakr.noaa.gov , or from the NMFS Alaska Region
(see ADDRESSES).
For the transfer of PQS or IPQ, an application must contain a
signature of a representative of an ECC entity with ROFR. For the
transfer of CVC QS or IFQ or CPC QS or IFQ, individuals must submit
proof of at least one landing of crab in any crab fishery in the 365
days prior to submission to NMFS of the application. Proof of this
landing is either: signature of the applicant on an ADF&G Fish Ticket;
or an affidavit from the vessel owner attesting to that individual's
participation as a member

[[Page 63222]]

of a fish harvesting crew on board that vessel at the time of the
landing.
NMFS would establish the deadline of August 1 by which QS and PQS
holder must apply for their annual IFQ or IPQ permits for that crab
fishing year. This deadline provides NMFS the time necessary to
calculate whether, and how much, of the IFQ issued to a person should
be designated as Class A or Class B IFQ based on the affidavit of
affiliation provided in the application. NMFS would need to know all
affiliation information for all persons to calculate the Class A/B IFQ
ratios for each person accurately. Without this deadline, NMFS would
not have sufficient information on affiliations and could not calculate
the Class A/B ratio for a person.
This deadline date of August 1 allows NMFS time to issue the IFQ
and IPQ for the Aleutian Islands golden king crab fishery (which
typically begins in mid-August) and sufficient time to calculate and
issue the IFQ and IPQ for all the other fisheries when the TACs are
announced by the State of Alaska (in the Fall). Between August 1 and
the issuance of IFQ or IPQ for a crab fishery, NMFS would not approve
any transfers of QS, PQS, IFQ, or IPQ. This limit on transfer approval
ensures that NMFS calculates the Class A/B IFQ ratio based on the
affiliation information of all persons in the fishery at the same time.
Once the IFQ and IPQ is issued, NMFS would resume the approval of valid
transfer applications. For most crab fisheries, this would effectively
result in a one month period when NMFS would not approve transfers.
Persons may still submit applications during this time, but approval
would not occur until NMFS has issued the IFQ and IPQ for the crab
fishery.
Approval criteria for an Application for Transfer of Crab QS/IFQ or
PQS/IPQ. An Application for Transfer of Crab QS/IFQ or PQS/IPQ would
not be approved until the Regional Administrator has determined that:
(1) The person applying to receive the quota is eligible to receive it;
(2) The application is notarized; (3) All fees for this program are
paid as well as any fines, civil penalties, or other payments due and
owing, or outstanding permit sanctions, resulting from Federal fishery
violations involving either party exist; (4) The person applying to
receive quota currently exists; (5) The transfer would not cause the
person applying to receive the quota to exceed the use limit; (6) The
person applying to make or receive the QS, PQS, IFQ or IPQ transfer has
submitted an EDR, if required; (7) In the case of the transfer of PQS
or IPQ, that the provisions for ROFR have been met; and (8) Other
pertinent information requested on the application for transfer has
been supplied to the satisfaction of the Regional Administrator.
Application for Transfer of Crab QS/IFQ to or from an ECCO. An
Application for Transfer of Crab QS/IFQ to or from an ECCO must be
approved by the Regional Administrator. This application is required
for the ECCO to hold the QS and for the individual that would use the
IFQ to harvest crab. Any transfer of QS from an ECC by the ECCO
requires authorization of the appropriate governing body of the ECC to
ensure proper oversight.
In the application, all individuals applying to receive IFQ by
transfer from an ECCO must submit proof of at least one delivery of
crab in any crab fishery in the 365 days prior to submission to NMFS of
the application. Proof of this landing is either: the signature of the
applicant on an ADF&G Fish Ticket; or an affidavit from the vessel
owner attesting to that individual's participation as a member of a
fish harvesting crew on board that vessel during that landing. In
conjunction with the transferee, the ECCO would be a party to the
Application for the Transfer of QS/IFQ to or from an ECCO. The ECCO
would provide to NMFS an explanation for the transfer of QS/IFQ to be
included in NMFS' review of the community benefits of ECCO's. Included
among the reasons for transfer are: facilitation of ECCO management and
administration; to finance future QS purchases by the ECCO; to permit
community residents to fish; or, to facilitate dissolution of the ECCO.
A person receiving IFQ from an ECCO must affirm that they have been a
permanent resident in the ECC for a period of 12 months prior to the
submission of the application.
ECCO Annual Report for an ECC. In addition to the Application to
Transfer Crab QS/IFQ to or from an ECCO, the ECCO must submit an annual
report for the ECC to NMFS. An ECCO would be required to submit a
complete annual report by June 30 of the crab fishing year that it is
required. If an ECCO did not submit an annual report for the previous
year, NMFS would not approve an Application to Transfer Crab QS/IFQ to
or from that ECCO. This annual report is similar to the requirement in
the current halibut and sablefish community purchase program. The
annual report would ensure that the ECCO maintains the intent of the
ECC QS purchase provisions that the QS and IFQ benefit residents of
eligible communities.
The annual report would detail the use of the QS and IFQ in that
community, including information on the IFQ lease holders, crew
employed, criteria used by the ECCO to distribute IFQ leases among
eligible community residents, any changes in the management structure
of the ECCO, and copies of decision making documents from ECCO board
meetings. In addition, NMFS would request a description of efforts the
ECCO has made to ensure that IFQ lessees employ crew members who are
eligible community residents of the ECC aboard vessels on which IFQ
derived from QS held by an ECCO is being fished.

Inter-cooperative Transfers

A crab harvesting cooperative would be permitted to transfer its
IFQ only to another crab harvesting cooperative. Crab harvesting
cooperatives wishing to engage in an inter-cooperative transfer
must complete an Application for Inter-cooperative Transfer.
Application for Inter-cooperative Transfer. A complete
application consists of the following: (1) the name and contact
information of the crab harvesting cooperative transferor and
transferee; (2) the identification of the crab IFQ being transferred,
including the permit number, year that permit was issued, and number of
pounds being transferred; (3) price paid for the IFQ; (4) whether an
EDR was submitted, if required; (5) whether all fees have been paid;
and (6) original notarized signatures of both the transferee and
transferor. The approval criteria for an Application for
Inter-Cooperative Transfer are the same as those for an
Application for Transfer of Crab QS/IFQ or PQS/IPQ.

Specific Provisions on the Transfer of CVO and CPO QS and IFQ

CVO and CPO QS and the resulting IFQ would be transferrable under
the Program, subject to the caps on the amount of shares a person may
hold or use. Leasing would be defined for purposes of this program as
the use of IFQs on a vessel in which the QS holder has less than 10
percent ownership interest or on which the QS holder is not present.
The general provisions for the leasing of CVO and CPO IFQ (i.e., the
temporary transfer of IFQs without the accompanying QS) would expire on
July 1, 2010, which is five years after Program implementation. Leasing
among crab harvesting cooperatives would not expire. The Council's
intent in allowing leasing to continue through crab harvesting
cooperatives is to create an incentive for cooperative membership.

[[Page 63223]]

Specific Provision on the Transfer of CVC and CPC QS and IFQ

CVC or CPC QS would be fully transferable to persons determined by
NMFS to be eligible to receive this type of QS by transfer. In order to
be eligible to receive CVC/CPC QS and/or IFQ by transfer, a person must
be an individual U.S. citizen with at least 150 days of sea time as
part of a harvesting crew in any U.S. commercial fishery. Additionally,
the person must be an ``active participant'' in the BSAI crab fisheries
as demonstrated by a landing in a crab fishery in the last 365 days.
Documentation of ``active participation'' includes an ADF&G fish
ticket, an affidavit from the vessel owner, or other verifiable
documentation.
The accompanying CVC or CPC IFQ may also be leased until July 1,
2008. After July 1, 2008, leasing would be permitted only in the case
of a documented hardship for the term of the hardship, subject to a
maximum of 2 years over a 10 year period. A hardship would be
considered if there is: (1) a severe medical condition of the QS holder
documented by a medical doctor who verifies the QS holder cannot
participate in the fishery because of the medical condition, (2) a
medical condition involving a person that requires the QS holder's
full-time care of that person, or (3) a total or constructive
physical loss of a vessel. The QS holder would be required to provide
documentation to NMFS the vessel was lost and could not be replaced in
time to participate in the fishery.

Specific Provisions on the Transfer of PQS and IPQ

PQS and the resulting IPQ are fully transferable subject only to
use and ownership caps. This allows for the entry of new processors
into the fishery. The Council did not identify any specific eligibility
criteria for persons wishing to obtain PQS or IPQ by transfer. However,
the Council did establish a ROFR provision that restricts transfers of
PQS and IPQ out of a community.

Right of First Refusal (ROFR)

The Program contains provisions for a ROFR to be granted to ECCs,
with the exception of Adak, for the purchase of PQS/IPQ that is
proposed by the PQS holder to be transferred out of the ECC. ROFR would
apply to all crab PSQ/IPQ derived from legal processing that occurred
in that ECC except for PSQ/IPQ issued for Tanner crab, Western Aleutian
Islands golden king crab, and Adak red king crab. The Tanner crab
fishery is exempt because this species has been and likely would
continue to be a concurrent fishery with Bristol Bay red king crab and
snow crab. The Western Aleutian Islands golden king crab fishery is
exempt because the fishery is regionalized in a manner that largely
makes ROFR provisions unnecessary. Last, the Adak red king crab fishery
was closed for several years limiting community dependence on that
fishery.
To qualify as an ECC, a community must have processor history that
accounts for at least 3 percent of the initial allocation of PQS in any
crab fishery. The 3 percent threshold is intended to limit the ROFR to
communities with historical dependence on the crab fisheries. Based on
the Alaska State fish ticket database, the following nine communities
meet this threshold of historical dependence as an ECC: Adak, Akutan,
False Pass, St. George, St. Paul, Dutch Harbor, Kodiak, King Cove, and
Port Moller. Adak is not eligible for ROFR because the Program excludes
any community that receives a direct allocation of crab, which Adak
does (see provisions for Adak allocation within this proposed rule).
The rationale for this provision is that the direct allocation of crab
is sufficient to support Adak's dependence on the crab fisheries, and
any further protection of the community's interest in the fisheries is
unnecessary.
ECCs would be required to designate an entity to represent it for
purposes of ROFR. For those ECCs that are also CDQ communities (Akutan,
False Pass, St. George, and St. Paul), the entity would be the CDQ
group of which the community is a member. For non CDQ communities that
are ECCs (Dutch Harbor, Kodiak, King Cove, and Port Moller), the entity
would be a person or organization designated by the governing bodies of
the ECCs. The entity for an ECC would be designated the right to
intervene on behalf of its communities if a PQS holder proposes to
transfer PQS or IPQ outside the community.
The ROFR provisions attempt to strike a balance between community
and industry interests. Generally, the ROFR provides an ECC with the
right to purchase PQ or IPQ from a processor for the same price and
subject to the same conditions as offered by the seller in an open
market. Under this system, the holder of PQS/IPQ would notify the ECC
or its representative of the terms of the pending sale. The ECC would
then have the opportunity to exercise the ROFR by notifying the seller
of acceptance of those terms within a specified time period. If the
terms are not accepted, the open market sale may proceed.
An exception to the ROFR would allow a company to consolidate
operations among several commonly owned plants to achieve
intra-company efficiencies. In addition, companies could lease
IPQ for use outside a community. However, use of more than 20 percent
of a person's IPQ holdings outside an ECC during a crab fishing year
would trigger the ECC's right of first refusal. The time period of a
crab fishing year to allow for this 20 percent exception differs from
the Council's motion that was based on a time period of ``3 of the
preceding 5 years.'' Under the Council's motion, 5 years potentially
would need to pass before an ECC entity could determine whether or not
to exercise ROFR. This approach would be inconsistent with the
community protection objective of ROFR. Thus, NMFS proposes to base
this 20 percent exception on an annual time period and specifically
requests public comment on this approach relative to Council objectives
and practicality (see ADDRESSES).
The designation of a representing entity for non-CDQ ECCs
must be completed well in advance of the end of the application period
for initial issuance of PQS to allow applicants for PQS and ECC
entities to develop and sign contracts between the ECC entity and the
applicant for PQS. The Council suggested ECCs designate the entity to
represent it for purposes of ROFR at least 90 days before the end of
the application period for initial issuance of PQS. This time frame
would provide processors time to enter a contract that would establish
ROFR. Given the proposed application period is 60 days and in order to
meet a schedule that would allow for issuance of QS for the 2005 Fall
crab fisheries, NMFS proposes that ECCs designate the entity to
represent them within 30 days of the publication of the final rule
which implements the Program. This time frame still would allow a
60-day period for processors to enter into contracts prior to
submission of their application for PQS. An application for PQS would
not be considered complete until it is accompanied by a valid contract
signed by the applicant for initial issuance of PQS and the ECC entity.
To exercise a ROFR, an ECC would be required to meet all of the
terms and conditions of the underlying transaction. As indicated above,
the ROFR would be established by a contract to be entered into between
the PQS holder receiving the allocation of PQS and the ECC entity. The
applicant for PQS would be required to enter the

[[Page 63224]]

contract in order to receive the initial allocation of PQS by NMFS.
The contracts establishing the ROFR for ECCs must include specified
conditions set forth at Sec. 680.40(m). An explanation for each of
these conditions is presented in section 3.6.2.2 of Appendix 1 to the
EIS (see ADDRESSES). These conditions were developed by an ad hoc
committee assigned by the Council to develop community protection
measures and were ultimately adopted by the Council. They generally are
intended to protect a balance between community and processor interests
while providing some flexibility under contractual arrangements that
would be enforced through civil contract law. NMFS does not intend to
provide draft contractual language for purposes of ROFR; however, the
agency would support the enforcement of some of the contract
conditions, such as requiring signed contracts to be submitted as part
of the application process for initial issuance of PQS. Similarly, NMFS
would require the ECC entity as signatory on the contract to
acknowledge in writing the community does not wish to exercise ROFR
prior to agency approval of any transfer of PQS or IPQ. NMFS also could
annually notify each ECC entity of the location where IPQs from the
community were used and of any transfer of shares linked to the
community. This notification could assist the community in tracking
transfers and use of shares, thereby assisting the community efforts to
enforce the ROFR. NMFS specifically requests comments on whether such
notification would be helpful (see ADDRESSES).
The Program would establish an additional ROFR provision for ECCs
located in the northern GOA. The only ECC in this area is the combined
City and Borough of Kodiak. Under this provision, the ECC entity
representing Kodiak would have a ROFR to purchase PQS that is proposed
to be transferred from non ECC communities located in the northern GOA.
The terms and conditions supporting Kodiak's ROFR would be the same as
those for the general ROFR provisions referenced above. Applicants for
PQS in non ECC communities in the northern GOA would be required to
enter into a contract with the ECC entity representing Kodiak and to
submit a copy of a signed contract with their application for initial
issuance of PQS. Subsequently, a holder of PQS in a non ECC community
in the northern GOA who wishes to transfer PQS out of that community
must provide NMFS with a written acknowledgment from the ECC entity
representing Kodiak confirming that Kodiak does not wish to exercise
ROFR prior to agency approval of transfer of PQS to a community other
than Kodiak.
The northern GOA ROFR provision is intended to provide Kodiak with
a ROFR that would enable it to consolidate processing shares of non ECC
communities in the northern GOA.

QS, PQS, IFQ, and IPQ Use Caps

This proposed rule establishes use caps on the amount of QS, PQS,
IFQ, and IPQ which may be held by a person and the amount of IFQ used
on a vessel. Use caps would limit the degree of consolidation of QS and
PQS holders and the numbers of vessels in the crab fisheries.

QS and IFQ Use Caps

Use caps would be imposed on a person's holdings of QS. No person
could use IFQ in excess of the amount of IFQ that is yielded from these
QS caps unless that IFQ is derived from QS that was received by that
person in the initial allocation of QS for that crab fishery. Different
caps are chosen for the different fisheries because fleet
characteristics and dependence differ across fisheries. Separate caps
on QS holdings are established for CDQ groups. Also, separate caps
would be established for persons who hold QS and PQS.
Use caps on the amount of QS and IFQ a person may hold are based on
the initial QS pools to provide greater stability for participants and
to determine where their allocation is relative to the overall
allocations. Because the QS pool would change over time, establishing a
set pool early-on would provide greater stability and would not
require QS holders to divest themselves of QS should the quota pool
change. The QS use caps in the halibut and sablefish IFQ program are
set at a fixed amount of QS units, and a similar management approach is
used to set use caps in this Program.
A person who receives an initial allocation of QS that exceeds the
use caps listed here is limited to hold no more than that amount. NMFS
would not issue a person QS in excess of use caps based on QS derived
from landings attributed to an LLP license obtained via transfer after
June 10, 2002. This provision would prevent excessive consolidation
prior to the issuance of QS through the trading of LLP licenses and
their associated history.
Non-individuals holding QS would be required to provide, on
an annual basis, ownership information as required by the Annual
Application for Crab IFQ/IPQ Permit. Use caps would be applied both
individually and collectively. Under this rule, all of a person's
direct holdings of QS and IFQ would be credited toward the cap. In
addition, a person's indirect holdings would be also credited toward
the cap in proportion to the person's ownership interest. For example,
if a person owns a 20 percent interest in a company that holds 100 QS
units, that person is credited with holding 20 QS units for purposes of
determining compliance with the cap.
These caps would be applied in two steps. First, NMFS would use a
threshold rule for determining whether the shares are held by a person.
Second, NMFS would use the individual and collective rule for
determining the extent of share ownership. Under the threshold rule,
any entity with 10-percent or more common ownership is
considered to be an owner for purposes of determining this cap. Any
direct holding of QS by those entities would be fully credited to the
QS holder for purposes of establishing use caps. See the following
table for details:

Table 11--Use Caps on QS and IFQ Holdings for all Persons not Holding
PQS, and Non-CDQ Groups
------------------------------------------------------------------------
CVO and CPO Use Cap CVC and CPC Use
Fishery in QS Units Cap in QS Units
------------------------------------------------------------------------
1.0 percent of the initial QS 3,880,000 120,000
pool for Bristol Bay red king
crab
------------------------------------------------------------------------
1.0 percent of the initial QS 9,700,000 300,000
pool for Bering Sea snow crab
------------------------------------------------------------------------
1.0 percent of the initial QS 1,940,000 60,000
pool for Bering sea Tanner
crab
------------------------------------------------------------------------
2.0 percent of the initial QS 582,000 18,000
pool for Pribilof Islands red
and blue king crab
------------------------------------------------------------------------

[[Page 63225]]

2.0 percent of the initial QS 582,000 18,000
pool for St. Matthew blue king
crab
------------------------------------------------------------------------
10.0 percent of the initial QS 970,000 30,000
pool for Eastern Aleutian
Islands golden king crab
------------------------------------------------------------------------
10.0 percent of the initial QS 3,880,000 120,000
pool for Western Aleutian
Islands golden king crab
------------------------------------------------------------------------
10.0 percent of the initial QS 5,820,000 180,000
pool for Western Aleutian
Islands golden king crab
------------------------------------------------------------------------

The use cap limits for CDQ Groups are shown in the following table
(Table 12). The QS and IFQ use caps in Table 12 apply to a CDQ group
regardless of whether the CDQ holds PQS and QS. No CDQ group could use
IFQ in excess of the amount of IFQ that is yielded from these QS caps
unless that IFQ is derived from QS that was received by that CDQ group
in the initial allocation of QS for that crab fishery.

Table 12--Use Caps on QS and IFQ Holdings for CDQ Groups
------------------------------------------------------------------------
CDQ CVO and CPO Use Cap in QS
Fishery Units
------------------------------------------------------------------------
5.0 percent of the initial QS pool for 19,400,000
Bristol Bay red king crab
------------------------------------------------------------------------
5.0 percent of the initial QS pool for 48,500,000
Bering Sea snow crab
------------------------------------------------------------------------
5.0 percent of the initial QS pool for 9,700,000
Bering sea Tanner crab
------------------------------------------------------------------------
10.0 percent of the initial QS pool for 2,910,000
Pribilof Islands red and blue king crab
------------------------------------------------------------------------
10.0 percent of the initial QS pool for 2,910,000
St. Matthew blue king crab
------------------------------------------------------------------------
20.0 percent of the initial QS pool for 1,940,000
Eastern Aleutian Islands golden king
crab
------------------------------------------------------------------------
20.0 percent of the initial QS pool for 7,760,000
Western Aleutian Islands golden king
crab
------------------------------------------------------------------------
20.0 percent of the initial QS pool for 11,640,000
Western Aleutian Islands golden king
crab
------------------------------------------------------------------------

No person who holds QS and PQS could use IFQ in excess of the
amount of IFQ that is yielded from these QS caps unless that IFQ is
derived from QS that was received by that person in the initial
allocation of QS for that crab fishery. The use cap limits for PQS
holders who also hold QS are shown in the following table:

Table 13--Use Caps on QS and IFQ Holdings for Persons who Hold QS and
PQS
------------------------------------------------------------------------
CVO and CPO Use Cap CVC and CPC Use
Fishery in QS Units Cap in QS Units
------------------------------------------------------------------------
5.0 percent of the initial QS 19,400,000 600,000
pool for Bristol Bay red king
crab
------------------------------------------------------------------------
5.0 percent of the initial QS 48,500,000 1,500,000
pool for Bering Sea snow crab
------------------------------------------------------------------------
5.0 percent of the initial QS 9,700,000 300,000
pool for Bering sea Tanner
crab
------------------------------------------------------------------------
5.0 percent of the initial QS 1,455,000 45,000
pool for Pribilof Islands red
and blue king crab
------------------------------------------------------------------------
5.0 percent of the initial QS 1,455,000 45,000
pool for St. Matthew blue king
crab
------------------------------------------------------------------------
5.0 percent of the initial QS 485,000 15,000
pool for Eastern Aleutian
Islands golden king crab
------------------------------------------------------------------------
5.0 percent of the initial QS 1,940,000 60,000
pool for Western Aleutian
Islands golden king crab
------------------------------------------------------------------------
5.0 percent of the initial QS 2,910,000 90,000
pool for Western Aleutian
Islands golden king crab
------------------------------------------------------------------------

[[Page 63226]]

CVC and CPC QS and IFQ use is capped based on the QS and IFQ pool
that is issued to those QS sectors, not as a percentage of the whole QS
pool, or TAC issued for that fishery for that year. The effect is that
the use caps are set at the percentage of the QS pool for that sector.
This is intended to preserve the goals of CVC and CPC QS and IFQ
allocations as a means to provide participation for crew members and
limit consolidation in crew employment.

PQS Use Caps

A person may not use more than 30 percent of the initial PQS pool
in any crab fishery unless that person received an initial allocation
of PQS in excess of this limit. A person would not be issued PQS in
excess of the use caps based on processing history transferred after
June 10, 2002, the same date for limiting the QS use caps. This would
limit the consolidation that could occur prior to the implementation of
this Program, thereby frustrating the goals of a use cap limitation.
As with vertical integration caps, PQS use caps would be applied
using a threshold rule for determining whether the shares are held by a
processor and then the individual and collective rule for determining
the extent of share ownership. Under the threshold rule, any entity
with 10 percent or more common ownership with a processor is considered
to be a part of that processor. Any direct holdings of those entities
would be fully credited to the processor's holdings. Indirect holdings
of those entities would be credited toward the processor's cap in
proportion to the entity's ownership.

IPQ Use Caps

IPQs would be capped at the same levels as those for the PQS, and
the same would be established using the same threshold rule for
determining the amount of PQS held by a person. In addition to this
general use cap, two other provisions would apply to IPQs. In addition
to the overall 30 percent PQS use cap, in the Bering Sea snow crab
fishery no person would be permitted to hold in excess of 60 percent of
the IPQ issued with a North region designation for that fishery.
A further restriction would exist, which limits the annual
allocation of IPQs in seasons when the TAC exceeds a threshold amount
in two fisheries. In the Bristol Bay red king crab fishery, IPQs would
not be issued for the amount of the TAC in excess of 20 million pounds
(9,072 mt). In the Bering Sea snow crab fishery, IPQs would not be
issued for the amount of the TAC in excess of 175 million pounds
(79,379 mt). Any Class A IFQ issued in excess of the threshold would
not be required to be delivered to an RCR with unused IPQ, but it would
be subject to the regional landing requirements. This Class A IFQ would
be distributed among users based on their QS holdings.

Vessel Use Caps

The amount of CVO or CPO IFQ that could be used on any one vessel
during a crab fishing year would be limited. This vessel use limit
would apply for all vessels, except for vessels that participate solely
in a crab harvesting cooperative. A vessel could not harvest crab in
excess of the following percentages of the TAC for that crab fishery
for that crab fishing year: (1) 2 percent of the TAC for the Bering Sea
snow crab, Bristol Bay red king crab, and Bering Sea tanner crab
fisheries; (2) 4 percent of the TAC for the Pribilof Islands red and
blue king crab, and St. Matthew blue king crab fisheries; and (3) 20
percent for Eastern Aleutian Islands golden king crab, Western Aleutian
Islands golden king crab, and Western Aleutian Islands red king crab
west of 179[deg] W. long.
CVC or CPC QS used on a vessel would not be included in determining
whether a vessel use cap is met. Crab that are allocated to the CDQ
program or the Adak community entity would not be included in
determining whether a vessel use cap is met.
A person who receive an approval of IFQ allocation in excess of
these vessel use caps may catch and retain all of that IFQ with a
single vessel. However, two or more persons may not catch and retain
their IFQs with one vessel in excess of these limitations.
The vessel use cap would not apply to a vessel if all of the IFQ
used on that vessel in a crab fishing year is IFQ held by a crab
harvesting cooperative. This exemption does not apply if that vessel is
used to harvest any amount of IFQ not held by a crab harvesting
cooperative during the same crab fishing year.

Catcher/Processor Vessel Activity

A person may purchase additional PQS for use on a CP vessel, but
any crab processed with purchased PQS must be processed within three
miles of shore in the region designated for that PQS. This effectively
limits the use of PQS and the resulting IPQ to vessels that are
operating as stationary floating crab processors.
A vessel operating as a CP may not accept deliveries of Class B IFQ
for processing. For purposes of this provision, any vessel that
receives and processes crab harvested with Class B IFQ for processing
during a season would be prohibited from acting as a CP during the
remainder of the season, and any vessel that operates as a CP during a
season would be prohibited from receiving and processing crab harvested
with Class B IFQ during that season. This provision only applies for
that crab fishery for that season. A vessel could operate as a CP in
one crab fishery and receive crab harvested with Class B IFQ in another
crab fishery.

QS Holder On Board Provisions

A person holding CVC or CPC QS is required to be aboard the vessel
upon which their IFQ is being harvested; unless the IFQ resulting from
that QS has been: (1) leased to a qualified person; or (2) is used by a
crab harvesting cooperative.
A person holding CVO or CPO QS does not have to be aboard the
vessel being used to harvest their IFQ if they hold at least a 10
percent ownership interest in the vessel upon which the IFQ is to be
harvested and are represented by a crab IFQ hired master employed by
that QS holder.

Crab Harvesting Cooperatives

Consistent with the Fishermen's Collective Marketing Act (FCMA, 15
U.S.C. 521) and other applicable laws, including antitrust, QS holders
may form voluntary crab harvesting cooperatives to combine and
cooperatively manage their aggregate QS holdings. Each cooperative that
is approved by NMFS would receive the amount of cooperative IFQ that
would be yielded by the aggregate QS holdings of all of the members of
the cooperative. The Program contains two primary incentives to
encourage individual QS holders to join and participate in crab
harvesting cooperatives. First, vessels fishing exclusively in
cooperatives would be exempt from the vessel use caps that restrict
vessels that harvest individually-held IFQ. Second, beginning in
the sixth year of the program, only leasing within cooperatives or
between cooperatives would be allowed. The proposed regulations at
Sec. 680.21 set out the provisions governing the formation and
operation of crab harvesting cooperatives.

Membership Requirements

Under the Program, a minimum membership of four unique QS holders
would be required for cooperative formation. The language of Amendment
18 explicitly states that the four or more unique members of a crab
harvesting cooperative are to be harvester QS holders engaged in one or
more crab

[[Page 63227]]

fisheries. Therefore, the proposed regulations concerning membership
requirements for a crab harvesting cooperative require that members of
a cooperative be QS holders. However, there is no explicit language in
Amendment 18 as to whether QS holders who also hold PQS or IPQ, or are
affiliated with persons who hold PQS or IPQ, may be members of a crab
harvesting cooperative. NMFS considered this issue in developing the
proposed rule and, for the reasons set forth below, proposes that QS
holders who also hold PQS or IPQ or are affiliated with persons who
hold PQS or IPQ be prohibited from joining a crab harvesting
cooperative.
Section 313(j)(6) of the Magnuson-Stevens Act (16 U.S.C.
1862(j)(6)) states that ``Nothing in [the Magnuson-Stevens Act]
shall constitute a waiver, either express or implied, of the antitrust
laws of the United States.'' However, the FCMA was enacted to provide
exemptions from antitrust liability for certain activities by
associations of qualified members. The FCMA reads as follows:
Sec. 521. Fishing industry; associations authorized; ``aquatic
products'' defined; marketing agencies; requirements
Persons engaged in the fishery industry, as fishermen, catching,
collecting, or cultivating aquatic products, or as planters of
aquatic products on public or private beds, may act together in
associations, corporate or otherwise, with or without capital stock,
in collectively catching, producing, preparing for market,
processing, handling, and marketing in interstate and foreign
commerce, such products of said persons so engaged.
The term ``aquatic products'' includes all commercial products
of aquatic life in both fresh and salt water, as carried on in the
several States, the District of Columbia, the several Territories of
the United States, the insular possessions, or other places under
the jurisdiction of the United States.
Such associations may have marketing agencies in common, and
such associations and their members may make the necessary contracts
and agreements to effect such purposes: Provided, however, That such
associations are operated for the mutual benefit of the members
thereof, and conform to one or both of the following requirements:
First. That no member of the association is allowed more than
one vote because of the amount of stock or membership capital he may own
therein; or
Second. That the association does not pay dividends on stock or
membership capital in excess of 8 per centum per annum.
and in any case to the following:
Third. That the association shall not deal in the products of
nonmembers to an amount greater in value than such as are handled by
it for members.
The FCMA, enacted in 1934, permits persons engaged in the fishing
industry, as fishermen that catch, collect, or cultivate aquatic
products or as planters of aquatic products, to act together in
associations (cooperatives) for the purposes listed. The FCMA extended
to the fishing industry the exemption from the operation of antitrust
laws that is granted to agricultural cooperatives in the Clayton Act
(15 U.S.C. 17) and the Capper-Volstead Act (7 U.S.C. 291, et
seq.). The intent of the FCMA is to provide fishermen, acting through
fishery cooperatives, an opportunity to compete on the same basis as
may an individual corporation. Because there is no waiver of antitrust
laws in the Magnuson-Stevens Act and because the only exemption
from antitrust law for fishing cooperatives is provided by the FCMA,
crab harvesting cooperatives are required to be organized and operate
in a manner that is consistent with requirements of the FCMA and the
proposed rule contains a provision reflecting this requirement.
According to the case law that has developed under the
Capper-Volstead Act and the FCMA (particularly National Broiler
Marketing Assn. v. United States, 436 U.S. 816 (1978) and United States
v. Hinote, 823 F. Supp. 1350 (S.D. Miss. 1993)), all members of an
FCMA-protected cooperative must be ``producers'' and any
non-producer participation in the control and policy making of a
cooperative would disqualify the cooperative for exemption from
antitrust law provided by the FCMA. While NMFS recognizes that there is
some legal uncertainty as to whether members of a cooperative who
participate in both production and processing would be considered
``non-producers,'' NMFS has determined that there is a
significant likelihood that a crab harvesting cooperative that is
permitted to include members that hold PQS or IPQ or process Class B
IFQ, or who are affiliated with persons who hold PQS or IPQ or process
Class B IFQ would be found to include non-producer members and
therefore would fail to have the protections from antitrust law
afforded by the FCMA. Therefore, persons holding CVO, CVC, CPO, or CPC
QS would be considered QS holders for purposes of crab harvesting
cooperative formation. However, QS holders who also (1) hold PQS or
IPQ, (2) are affiliated with a person who holds PQS or IPQ, (3) process
Class B IFQ, or (4) are affiliated with a person that processes Class B
IFQ would be prohibited from joining a crab harvesting cooperative.
NMFS acknowledges that the proposed exclusion of QS holders that
also hold PQS or IPQ or process Class B IFQ, or that are affiliated
with persons that hold PQS or IPQ or process Class B IFQ from
cooperative membership would deny these QS holders from taking
advantage of the vessel use cap exemption that participation in a
cooperative would afford. However, even if the proposed regulations
permitted the membership of such persons in a cooperative, it is likely
that such participation could be excluded through other means.
Additionally, NMFS notes that although the proposed rule would not
exclude CP QS holders from membership in crab harvesting cooperatives,
the proposed rule would exclude CP QS holders that also hold PQS or IPQ
or process Class B IFQ, or who are affiliated with persons that hold
PQS or IPQ or process Class B IFQ from cooperative membership.
The proposed regulations also would prohibit members of a
cooperative, including CP QS holders, from acquiring PQS or IPQ during
the valid duration of the cooperative IFQ permit. These measures are
intended to minimize the risk of a finding that a crab harvesting
cooperative's members were not ``producers'' as required by the FCMA.
However, it is not clear that these limitations on membership and
acquisition remove the risk entirely. NMFS stresses that although a
crab harvesting cooperative may meet the regulatory requirements set
for in Sec. 680.21, the cooperative may not satisfy all of the
requirements for an FCMA cooperative. Persons wishing to form a crab
harvesting cooperative are strongly encouraged to consult with experts
in the field of antitrust.
In addition to the requirement that crab harvesting cooperatives be
organized according to the requirements of the FCMA, a cooperative also
would be required to be formed as a legal business entity registered
under the laws of one of the 50 states or the District of Columbia in
order to be eligible for a cooperative IFQ permit issued by NMFS.
Cooperative membership would be ``all or nothing'' in that each QS
holder would be able to join only one crab harvesting cooperative at
the beginning of each fishing year, and all QS held by each member
would be converted to cooperative IFQ. A QS holder would be prohibited
from joining more than one cooperative, and would be unable to allocate
only a portion of his QS holdings to a cooperative and retain the
remainder for conversion to individual IFQ for his own exclusive use.
NMFS believes that because the proposed rule would allow
unrestricted leasing between crab harvesting cooperatives, each
cooperative would be

[[Page 63228]]

free to focus on harvesting IFQ for the fisheries of its choice. Thus,
through leasing, cooperative members could realize the same benefits in
being a member of one cooperative as they could in joining multiple
cooperatives. Additionally, NMFS believes the ability to join multiple
cooperatives would cause a potentially unmanageable number of
cooperatives to be formed. NMFS is concerned that if membership is
allowed in more than one cooperative, then it would be easy for QS
holders to allocate a nominal amount of IFQ to a given cooperative and
form what would be, in effect, single member cooperatives. This would
undermine the Council's intent that each cooperative have at least four
independent members. Also, NMFS is concerned that bycatch may increase
if single-species cooperatives are formed because the
cooperative would have to discard all legal crab of species for which
the cooperative does not have IFQ. Finally, cooperative management by
its members is complex and technical, and NMFS is concerned that
cooperative management would be diluted by members who have joined
multiple cooperatives, and therefore, each cooperative would be less
effective at managing the harvesting of the cooperative's IFQ. NMFS
specifically requests public comment on whether QS holders should be
able to join more than one cooperative relative to these assumptions
and Council intent (see ADDRESSES).
Membership in crab harvesting cooperatives would be voluntary. No
QS holder would be required to join a cooperative to receive or harvest
IFQ, and no cooperative would be required to accept as a member a QS
holder that the cooperative does not wish to admit. Each member of a
cooperative would be required to maintain their membership in the
cooperative for the one-year duration of the cooperative IFQ
permit, or as long as they hold any amount of QS upon which the
cooperative's IFQ permit is based. However a cooperative member would
have an opportunity to leave their cooperative or change cooperatives
each year during the annual application process.
Members of a cooperative fishing under a cooperative IFQ permit
would be governed by the same regulations that govern individuals
fishing under an individual IFQ permit. The only persons eligible to
fish for crab under a cooperative IFQ permit would be the members of
the cooperative, or a crab IFQ hired master who is fishing on board a
vessel that is affiliated with (i.e. owned or controlled) by a member
of the cooperative. In addition, the members of a cooperative may be
held liable for any violations of the regulations applicable to fishing
for crab made by any person fishing under the cooperative.

Application for an Annual Crab Harvesting Cooperative IPQ Permit

Cooperatives would be required to apply for a cooperative IFQ
permit on an annual basis prior to July 1 of each year. If a
cooperative's application is approved by NMFS, the cooperative would
receive the sum of the annual IFQ allocations of its members in the
form of a cooperative IFQ permit that is issued to the cooperative
rather than the individual QS holders. Cooperative IFQ permits would
maintain all of the region, species, and sector designations of the
underlying QS held by the members of the cooperative with the following
exception.
CVC IFQ would lose their ``C'' designation (and associated holder
on board and leasing restrictions) when converted to cooperative IFQ so
that the CVC QS holders would be able to participate in cooperatives on
an equal basis with other QS holders. This means CVC IFQ could be
harvested by the cooperative without the CVC IFQ holder on board the
vessel. NMFS has determined that this approach is necessary to allow
the CVC QS holders to join and participate in cooperatives. The primary
purpose of crab harvesting cooperatives is to allow crab fishermen to
consolidate and collectively manage their QS holdings. If each
cooperative is required to treat CVC IFQ separately from other types of
IFQ, and if each CVC QS holder is required to be on board the vessel
any time the cooperative's CVC IFQ are being fished, then CVC QS
holders gain nothing from participating in a cooperative and would have
incentives to avoid joining cooperatives. This is because CVC QS
holders could otherwise retain their shares as individually-held
IFQ and fish their shares on board any vessel fishing for crab in the
BSAI. Without the ability to participate fully in the cooperative, CVC
QS holders would have no incentive to join any cooperative. In fact,
they would have reasons to avoid joining cooperatives because they
would gain no benefits from cooperative participation while at the same
time subjecting themselves to the increased complexity and potential
liability of participating in a cooperative.

Incentives to Join Crab Harvesting Cooperatives

The Program provides two incentives for QS holders to join
cooperatives. First, fishing vessels that are used to harvest
cooperative IFQ exclusively and that do not harvest any amount of
non-cooperative-held IFQ would be exempt from the vessel
use caps that apply to vessels used to harvest
non-cooperative-held IFQ. Second, beginning July 1, 2011,
only cooperatives would be allowed to lease IFQ and leasing of IFQ by
non-cooperative IFQ holders would be prohibited.

Transfers of QS and IFQ by Members of a Cooperative

The regulations governing the transfer of QS and IFQ would apply
somewhat differently to members of a cooperative who wish to transfer
QS and IFQ during the fishing season than they would to QS holders who
are not members of a cooperative. This is because at the time a QS
holder joins a cooperative, all of his or her QS would be converted to
cooperative IFQ that is held in common by the cooperative. A member of
a cooperative may buy or sell QS at any time during the fishing season
or between seasons simply by following the general requirements for the
transfer of QS at Sec. 680.41. A member of a cooperative also may
obtain IFQ at any time by following the general requirements for the
transfer of IFQ at Sec. 680.41 and may individually hold that IFQ or
may transfer the IFQ to the member's cooperative. However, once a
cooperative has been issued an IFQ permit, the members of that
cooperative cannot transfer away IFQ because they hold no IFQ of their
own. Only the cooperative may transfer away cooperative IFQ, and only
by following the requirements for the transfer of cooperative IFQ at
Sec. 680.41. Additionally, members of a cooperative would be
prohibited from acquiring any amount of PQS or IPQ during the valid
duration of the cooperative IFQ permit. The rational for this provision
is provided under the discussion of cooperative membership
requirements.
A cooperative that has been issued cooperative IFQ is not allowed
to hold QS directly, even though as a legal business entity, a
cooperative would otherwise be eligible to acquire and hold QS. This
prohibition on cooperatives holding QS is necessary to maintain the
regulatory distinctions between non-cooperative-held IFQ
and cooperative IFQ, and to simplify the administration of the Program.

Inseason Membership Changes

Because cooperative IFQ permits are annual permits, and
cooperatives are required to apply annually for each year's cooperative
IFQ permit, any changes in cooperative membership that

[[Page 63229]]

occur between fishing seasons would simply be reflected in the
following year's cooperative IFQ permit application. However, inseason
transfers of QS by members of a cooperative may result in the situation
where a current member of the cooperative no longer holds QS and/or a
new person holds QS that has been allocated to the cooperative in the
form of IFQ. If this occurs, then the cooperative has the option of
amending its membership to add or remove members through the submission
of an amended cooperative IFQ permit application. If the cooperative
chooses to amend its membership during the fishing season, then the
cooperative would be required to submit to NMFS an amended application
for cooperative IFQ reflecting the membership change. If the change to
cooperative membership is approved, NMFS would issue an amended IFQ
permit application to the cooperative reflecting the change in
membership. The same process may be used by a cooperative to
accommodate the rights of a successor in interest in the event that a
member dies (in the case of an individual), or dissolves (in the case
of a business entity).
Each cooperative would be free to develop its own procedures for
dealing with inseason membership changes. Cooperatives may choose to
grant automatic membership to persons who obtain QS through purchase or
as successors-in-interest to a member that died.
Conversely, they may establish their own procedures for deciding
whether to admit new members on an inseason basis. However a
cooperative decides to address the issue of inseason membership changes
a cooperative would not be required by NMFS to grant membership to a QS
holder with whom it does not wish to associate, regardless of how that
person acquired the QS in question. It is important to note that the
inseason membership process could not be used by a cooperative for
inseason expulsions of a member who holds QS that is allocated to the
cooperative in the form of IFQ. If a cooperative wishes to expel a
member that holds QS upon which the cooperative's IFQ is based, it must
wait until the end of the fishing year. In addition, this inseason
process could not be used to add a member that has not obtained QS that
is allocated to the cooperative in the form of IFQ. These two types of
membership changes can only be accomplished between fishing years
through the annual permit application process.

Protections for GOA Groundfish Fisheries

Protections, called sideboards limits, restrict the ability of
vessels with Bering Sea snow crab fishing history to participate in GOA
groundfish fisheries. The purpose of the proposed sideboard limits is
to prevent vessels that traditionally participated in the Bering Sea
snow crab fishery from using the flexibility of the Program to increase
their level of participation in the GOA groundfish fisheries, and
primarily the GOA Pacific cod fishery. Historically, the Bering Sea
snow crab fishery and GOA groundfish fisheries operated concurrently
from January through March, meaning that a crab vessel owner had to
decide whether to fish for Bering Sea snow crab or GOA groundfish but
could not participate fully in both fisheries. With crab
rationalization, vessel owners have the flexibility to fish for snow
crab whenever they want, or to lease their crab IFQ and not fish at
all. This increased flexibility for crab fishermen could lead to
increases in fishing effort in GOA groundfish fisheries, especially the
Pacific cod fishery, which is the primary groundfish target species for
pot vessels, negatively affecting the other participants in those
fisheries. This concern about spillover effects is limited primarily to
the GOA where the Pacific cod TAC is not allocated among gear types. In
the BSAI, most of the Pacific cod TAC is allocated to vessels using
longline and trawl gear and LLP license restrictions prevent the entry
of new pot vessels into the BSAI Pacific cod fishery, meaning that snow
crab fishermen who wish to increase their groundfish fishing activity
would need to look primarily to the GOA Pacific cod fishery.
The GOA groundfish sideboard restrictions would apply to any
non-AFA crab vessel with a fishing history that generated any
amount of Bering Sea snow crab QS, and to any LLP licenses earned in
whole or in part by the crab fishing history of such vessels. Because
AFA catcher vessels are already subject to sideboard restrictions in
the GOA under the implementing regulations for the AFA, no additional
restrictions for AFA catcher vessels with snow crab history are
proposed here. Those snow crab vessels subject to GOA groundfish
sideboard restrictions would be limited, in the aggregate, from
harvesting an amount of each GOA groundfish species that exceeds the
percentage of each species that such vessels retained, in the
aggregate, from 1996 to 2000 relative to the total retained catch of
each species by all groundfish vessels during the same period. The
sideboard restrictions are also apportioned by season and/or area for
each GOA groundfish TAC that is apportioned by season or area.
There are some additional sideboard restrictions and exemptions for
GOA Pacific cod that do not apply to other GOA groundfish species.
Specifically, any vessel subject to GOA groundfish sideboards that
landed less than 50 mt (110,231 lb) of GOA groundfish between 1996 and
2000 would be prohibited from engaging in directed fishing for Pacific
cod at all times. Additionally, any vessel that landed less than
100,000 pounds (45.4 mt) of Bering Sea snow crab and more than 500 mt
(1,102,311 lb) of GOA Pacific cod between 1996 and 2000 would be exempt
from the GOA Pacific cod sideboard restrictions. NMFS would notify all
persons who own a vessel or hold a LLP license as to whether they are
subject to the sideboard restrictions by issuing amended Federal
fisheries permits and LLP licenses to each affected vessel owner or LLP
license holder. The amended Federal fisheries permits and LLP licenses
would display the type of sideboard restriction on the face of the
permit or license.

Arbitration System

The Council developed the Arbitration System to compensate for
complications arising from the creation of both QS/IFQ and PQS/IPQ.
These complications include price negotiations that could continue
indefinitely and result in costly delays, and the ``last person
standing'' problem where the last parties to contract will have a
single market for their product or service. The Arbitration System is
designed to alleviate many of the concerns arising from the parity of
supply and demand under the Program. If an IPQ holder or IFQ holder
were unable to reach an agreement on price during open negotiations,
the negotiation approaches prescribed in the proposed regulations could
be used by certain participants to settle their disputes. This also
encourages more efficient negotiations by preventing indefinite
stalemates.
The Council, along with considerable input from the potential
participants, developed the Arbitration System to accommodate the
varied interests of the parties involved as well as reflect the
historical negotiations between harvesters and processors. The
Arbitration System identifies the general structure of the system and
the general principles that guide oversight and management. It also
identifies the roles and fundamental standards for the

[[Page 63230]]

Market Analyst in developing and producing a preseason Market Report
for each fishery, the Formula Arbitrator in developing a single annual
fleet-wide pricing formula (non-binding price formula),
the Contract Arbitrators in making decisions, and the last best offer
binding arbitration method as the arbitration procedure for participants.
Section 313(j)(6) of the Magnuson-Stevens Act, as amended by
section 801 of Pub. L. 108-199, stipulates that the legislation
does not provide any exemption to the antitrust laws. To the extent the
Arbitration System, as approved by the Council, would have permitted
actions that put the participants at risk of subjecting themselves to
antitrust liability, the Council approved minor changes, primarily to
address information exchanges that could have occurred under the
Arbitration System as originally approved. At its June 2004, meeting,
the Council adopted changes to the Arbitration System for approval by
January 1, 2005. The Council's changes are in Amendment 19 to the FMP
and would be implemented by these proposed regulations.

Council-Approved Changes to the Arbitration System

First, the Council eliminated a provision that would have allowed
PQS or IPQ holders to participate in common discussions concerning
historical prices in the fisheries. The intent of the provision was to
facilitate the development of information about historic division of
revenues, which is one of the primary bases upon which the Formula
Arbitrator establishes the non-binding price formula and upon
which the Contract Arbitrators will base a decision. The only
limitation upon PQS or IPQ holders was that the discussion would be
about historical prices. The provision, however, could have allowed PQS
or IPQ holders to engage in collective, direct discussions regarding
pricing information. The potential anticompetitive risks associated
with encouraging competitors to discuss pricing information, even
historical information, was too great. There was a high probability
that competitors could move beyond discussions on strictly
``historical'' information. Moreover, the availability of pricing
information facilitates collusion, especially when the processors will
be identified with the prices they charge. Further, information about
historical prices could be generated through other means, such as
information provided to the Market Analyst.
Second, the Council adopted changes to limit access of parties to
an arbitration proceeding to information provided directly by them to
the Contract Arbitrator in the proceeding in which they participate.
The Program originally provided all participants in an arbitration
access to all information provided to their Contract Arbitrator, which
could include information provided to other Contract Arbitrators in
binding arbitration proceedings to assist them in reaching decisions.
This provision could have allowed participants to access pricing and
other competitively sensitive information submitted to a Contract
Arbitrator by every Arbitration IFQ holder and IPQ holder during all
prior arbitration proceedings. Accordingly, it presented a serious
antitrust risk. Under the antitrust immunity provided by the FCMA, a
crab harvesting cooperative or members of a cooperative could share
sensitive competitive information with other members of the same
cooperative, but the arbitrator would not be the person to disseminate
such information. All participants in an arbitration proceeding would
be required to sign a confidentiality agreement stating they would not
disclose any information received from the Contract Arbitrator.
Third, the Arbitration System permitted harvesters to act
collectively during binding arbitration to the extent permitted by the
FCMA. The FCMA authorizes the establishment of cooperatives comprised
of fishermen. Pursuant to the FCMA, cooperative members may freely
exchange information, agree among themselves on the price they will
accept for their products, bargain jointly and agree on the basis for
negotiations without risking antitrust liability. If the cooperative or
members of the cooperative share sensitive competitive information or
attempt to collaborate with non-member harvesters on any issues
relating to price or costs, they would risk antitrust liability. The
Council adopted a change to clarify that IFQ holders that are members
of a FCMA crab harvesting cooperative can participate collectively as a
member of that FCMA cooperative in binding arbitration and that
non-member harvesters cannot participate collectively with
cooperative members during the arbitration procedures.
The proposed rule would clearly prohibit crab harvesting
cooperative members from sharing sensitive competitive information or
any issues relating to costs or price or collaborate with nonmembers at
any stage of the arbitration proceedings without risking antitrust
liability. Moreover, the proposed rule would prohibit collaboration
among members of different FCMA cooperatives for purposes other than
nominating and selecting the arbitrators and market analysts to avoid
behavior that is outside the scope of the antitrust immunity provided
by the FCMA.
Fourth, the Council eliminated a provision that required the Market
Analyst to survey the crab product throughout the year and periodically
publish prices in the crab product market. The periodic announcement of
prices presented a serious antitrust risk since it could provide a way
of matching up prices with individual market participants. To the
extent the information about product prices is necessary for the
Formula and Contract Arbitrators to perform their functions, they will
have it from other sources. The more frequent the periodic price
updates, the smaller would be the number of IFQ and IPQ holders as well
as distributors or customers generating the composite price that was
reported. Aggregation would have been less effective and if market
participants could know or learn which particular IPQ and IFQ holders
had completed negotiations or arbitrations during a particular survey
period, then it could be difficult to ensure price anonymity.
The announcement of recent prices and the lack of anonymity could
have made it easier for IPQ holders to arrive at agreements to set
prices and for IPQ holders to enforce the agreements. Under the
proposed rule, the Market Analyst would prepare only one annual Market
Report for each fishery and would be prohibited from issuing interim or
supplemental reports for each fishery.
Fifth, the Council changed the Arbitration System to limit the
announcement of the results of each arbitration decision as it occurs
to an IPQ holder and IFQ holders in that particular arbitration as well
as to IFQ holders that are not affiliated and have not committed to an
IPQ holder and who may want to opt-in to a previously completed
contract. The Program would have allowed the public announcement of the
outcome of each binding arbitration proceeding to inform IFQ holders
with uncommitted IFQ so they could decide whether to opt into the
completed contract. The provision raised antitrust concerns. If the
results of an arbitration decision were announced before all binding
arbitration proceedings were completed, they could influence what was
asked by the parties in a subsequent arbitration, resulting in price
stabilization. The change allows disclosure of all arbitration
decisions to

[[Page 63231]]

the Contract Arbitrators and to non-affiliated IFQ holders who
have not committed to an IPQ holder. The parties to an arbitration
would be required to agree to make the terms and conditions of the
arbitration decision available to non-affiliated uncommitted IFQ holders.

Arbitration System Requirements

The Council intended the Arbitration System to function as an
``industry-run'' system with minimal involvement by NMFS. The
Program establishes a structure for the negotiation of price, delivery
and other contract terms between an IPQ holder and IFQ holders. It
specifies the basic elements of the Arbitration System: the standards
for arbitration; the roles of the Market Analyst, Formula Arbitrator
and Contract Arbitrators; the data available to the Market Analyst and
Arbitrators; restrictions on participation by PQS and IPQ holders
(processors) and IFQ holders that are affiliated with PQS and IPQ
holders (processor-affiliates); last best offer binding
arbitration procedures; and payment for the system. The Program also
specifies that processor-affiliated shares can participate to
the extent allowed under the antitrust laws and that processors can
participate individually and not collectively, except in the choice of
the Market Analyst and the Arbitrators. The Arbitration System also is
mandatory for all IPQ and IFQ holders participating in the Program.
First, at any time prior to the season opening date, IPQ and IFQ
holders can initiate discussions through open negotiations. Open
negotiation is available to both affiliated and non-affiliated
IFQ holders and all IPQ holders. If they are unable to conclude a
contract through open negotiations, eligible persons, as defined by the
proposed rule, may use several other negotiation approaches to reach
agreement, including share-matching, mediation and binding
arbitration procedures.
The negotiation approaches and Binding Arbitration procedure are
limited to IPQ holders and Arbitration IFQ holders. Under the proposed
rule, Arbitration IFQ means: (a) Class A CVO IFQ held by a person who
is not a holder of PQS or IPQ and who is not affiliated with any holder
of PQS or IPQ; (b) prior to July 1, 2008, CVC IFQ held by a person who
is not a holder of PQS or IPQ and who is not affiliated with any holder
of PQS or IPQ that the holder has elected to submit to the Arbitration
System; (c) after July 1, 2008, Class A CVC IFQ held by a person who is
not a holder of PQS or IPQ and is not affiliated with any holder of PQS
or IPQ; and (d) IFQ held by a crab harvesting cooperative as long as no
member of such cooperative holds PQS or IPQ or is affiliated with a
person who holds PQS or IPQ.
Under the proposed rule, the structure of the Arbitration System
would be managed and carried out primarily by the participants in the
crab fisheries through contractual arrangements, with NMFS oversight.
The proposed rule would require that participants in the crab fisheries
join and maintain membership in an Arbitration Organization. The
persons who are eligible to join an Arbitration Organization are: (a)
holders of CVO and CVC QS; (b) holders of PQS; (c) holders of
Arbitration IFQ, (d) holders of Class A IFQ affiliated with a PQS or
IPQ holder; and (e) holders of IPQ.
While the Program does not require the establishment of arbitration
organizations and membership in such organizations, NMFS believes the
structure is necessary to facilitate the industry's ability to
coordinate among its members and carry out the Council's intent to
establish the Arbitration System primarily as an
``industry-run'' system. This approach also facilitates the
ability of NMFS to monitor the activities of members more efficiently
and effectively than monitoring numerous contracts among unique quota
holders. NMFS believes industry participants will have sufficient
interest in establishing the arbitration organizations, agreeing to the
contracts, and selecting the Market Analysts, Formula Arbitrators and
Contract Arbitrators necessary for the Arbitration System to function.
NMFS particularly invites public comment on the feasibility of basing
the structure of the Arbitration System upon intra-industry
contracts.
To minimize antitrust risks, this proposed rule would not allow
harvesters and processors to be members of the same Arbitration
Organization. The proposed rule would require that PQS and IPQ holders
and QS and IFQ holders must be members of different arbitration
organizations. Holders of PQS or IPQ could only be a member of a PQS/
IPQ Arbitration Organization, and they may join separate such
organizations. Holders of QS or IFQ who neither hold nor are affiliated
with a person who holds PQS or IPQ could only be a member of an
Arbitration QS/IFQ Arbitration Organization, and they may join separate
such organizations. Holders of QS or IFQ who are affiliated with a
person who holds PQS or IPQ could only be a member of an Affiliated QS/
IFQ Arbitration Organization, and they may join separate such
organizations. There could be Arbitration Organizations comprised
solely of members who hold QS or IFQ or PQS or IPQ.
Under the proposed rule, the Arbitration QS/IFQ Arbitration
Organizations and PQS/IPQ Arbitration Organizations would be
responsible for nominating and mutually selecting persons for the
positions of Market Analyst, Formula Arbitrators, and Contract
Arbitrators and establishing contracts with such persons. The contracts
would stipulate the functions and obligations of those positions
consistent with the roles and standards for the Market Analyst, Formula
Arbitrator, and Contract Arbitrators, as specified by the Program and
reflected in the proposed rule. They also would provide certain
information to NMFS. All arbitration organizations, among other
matters, would be responsible for ensuring the collection and payment
of all fees required to fund the Arbitration System; providing
information to their members, such as copies of the contracts with the
Market Analyst, Formula Arbitrator and Contract Arbitrators; and
enforcing the terms of various contracts to which they are a party. The
Arbitration Organizations would be prohibited from engaging in any
contract negotiations on behalf of their members except to the degree
necessary to hire the Market Analyst, Formula Arbitrator, and Contract
Arbitrators. This is not intended to prohibit the members of an
Arbitration IFQ Arbitration Organization from negotiating as a crab
harvesting cooperative under the FCMA.

Arbitration Standard

Reflecting the economic reality faced by both harvesters and
processors, the Council determined that preserving the historical
division of revenues in the fisheries in order to protect the
investment and reliance of the harvesters and processors should guide
the Arbitration System. The Program requires the Market Analyst,
Formula Arbitrator and Contract Arbitrators, in developing the
non-binding price formula and deciding an individual
arbitration, to consider: (1) current pricing; (2) consumer and
wholesale product prices; (3) innovations and developments of the
different sectors; (4) efficiency and productivity of the different
sectors; (5) quality standards for each market; (6) maintaining
financially healthy and stable harvesting and processing sectors; (7)
safety; (8) the timing and location of deliveries; and (9) reasonable
underages to avoid

[[Page 63232]]

penalties for overharvesting IFQ and reasonable deadloss.
Under the proposed rule, the Arbitration System would commence
preseason when the Arbitration QS Arbitration Organizations and the PQS
Arbitration Organizations nominate persons for the positions of Market
Analyst, Formula Arbitrator, and Contract Arbitrators. The PQS and QS
holders, who are members of their respective Arbitration Organizations,
then choose, by mutual agreement, the persons for these positions.
NMFS has interpreted ``mutual agreement'' to mean the agreement of
not less than 50 percent of the PQS holders and not less than 50
percent of the QS holders in a fishery. This standard does not require
complete consensus, but requires a majority of harvesters and
processors to agree on specific individuals. This approach increases
the likelihood of the selection of Market Analysts, Formula
Arbitrators, and Contract Arbitrators who are acceptable to the
majority of participants. Because the selection of the Market Analyst,
Formula Arbitrator, and Contract Arbitrators is critical to the
effective implementation of the Arbitration System, the standard for
the selection process should not be so stringent so as to prevent the
possibility of actually selecting a mutually acceptable Market Analyst,
Formula Arbitrator, and Contract Arbitrators.
To ensure the market analyses and pricing formula are available to
inform all negotiation among the IFQ and IPQ holders, the Arbitration
QS/IFQ Arbitration Organizations and PQS/IPQ Arbitration Organizations
would mutually agree through their contract to notify NMFS of the
selection of the Market Analysts, Formula Arbitrator and Contract
Arbitrators by June 1 for that crab fishing year, except during 2005,
they would be required to notify NMFS by July 1, 2005. The proposed
rule reflects the Program in that the same person could be selected as
Market Analyst and Formula Arbitrator; but the Contract Arbitrators
could not be the same person as the Market Analyst and Formula
Arbitrator, and could not be employed or associated with those persons.

Market Report

The Program requires the promulgation of a preseason Market Report
for each crab fishery to help inform all negotiations among all IPQ and
IFQ holders. The Market Report would be produced annually by a Market
Analyst selected jointly by the arbitration organizations. It would
provide an analysis of the market based on a survey of the market for
crab products from that fishery as well as information provided by the
IPQ and IFQ holders.
NMFS recognized the potential antitrust risk involved in exchanges
of cost and price information, and so the proposed rule requires that
the information provided by the participants must be historical in
nature and that the Market Report cannot identify which participants
provided specific information. These requirements are consistent with
the U.S. Department of Justice and Federal Trade Commission Statements
of Antitrust Enforcement Policy in Health Care (1966) (Guidelines). The
Guidelines create an antitrust ``safety zone'' around the exchange of
cost and price information when (1) the collection of the data is
managed by a third party, including a government agency; (2) the
information shared is based on information more than three months old;
and (3) there are at least five providers reporting data such that
recipients would be unable to identify the prices charged by any
particular firm. In adhering to the Guidelines, the proposed
regulations require that the IFQ holders and IPQ holders would give
information directly to the Market Analyst and not to any other IPQ
holder or IFQ holder, except that IFQ holders who are members of any
single crab harvesting cooperative may share such information with
other members of the same crab harvesting cooperative who are
authorized to participate in the Arbitration System, that the
information provided would be more than three months old, and the
information and data would be aggregated in the report so that prices
would not be identifiable with the person offering the price.
The Market Report could include information that is provided
through surveys, directly from IFQ and IPQ holders, and from other
sources that voluntarily provide data. The Market Analyst would not
have subpoena power to obtain information. The Market Analyst could
meet with crab harvesting cooperative members collectively, but would
have to meet individually with: (a) IPQ holders; (b) distinct crab
harvesting cooperatives; and (c) IFQ holders who are not members of the
same crab harvesting cooperative. The proposed rule prohibits the
Market Analyst from disclosing any information to any person except as
allowed by the requirements of the contract. The contract with the
Market Analyst would specify that the Market Analyst will provide the
Market Report not later than 50 days prior to the first crab fishing
season for that crab QS fishery in that crab fishing year to each
Arbitration Organization in that fishery and NMFS.

Non-binding Price Formula

To further guide the negotiations among all IFQ and IPQ holders,
the proposed rule would mirror the Program by requiring the development
and announcement of a non-binding pricing formula. Under the
proposed rule, the Arbitration QS Arbitration Organizations and the PQS
Arbitration Organizations contract with a Formula Arbitrator to develop
a non-binding price formula. The contract would specify that the
Formula Arbitrator must conduct a single annual fleet-wide
analysis of arbitrations to establish a non-binding pricing
formula under which a fraction of the weighted average first wholesale
prices for crab products from each fishery may be used to set an
ex-vessel price. The contract also would require that the
non-binding price formula: (a) must be based upon the historical
distribution of first wholesale revenues between fishermen and
processors in the aggregate based on arm's length first wholesale
prices and ex-vessel prices, taking into consideration the size
of the harvest in each year; and (b) must establish a price that
preserves the historical division of revenues in the fishery while
considering the nine factors described in the Arbitration Standard.
The non-binding pricing formula would be guided by the
general factors for the fishery as well as arbitration decisions from
the previous season. IPQ and IFQ holders could furnish relevant
information and data upon the request of the Formula Arbitrator subject
to the antitrust requirements that the information be historical and
the persons submitting information should not be identified as having
submitted specific information in the report. The contract would
require the Formula Arbitrator to provide the non-binding
pricing formula not later than 50 days prior to the first crab fishing
season for that crab QS fishery in that crab fishing year to each
Arbitration Organization in that fishery and NMFS.

Open Negotiations

The Program provides that prior to the crab fishing season, any IFQ
holder can negotiate with any IPQ holder on price and delivery terms
for the upcoming season. It allows the IFQ and IPQ holders to freely
contact each other to initiate open negotiations. If they reach an
agreement on all price and delivery terms during the preseason, a
binding contract would result. Due to the limitations of the antitrust
laws, IPQ

[[Page 63233]]

holders would be required to negotiate individually with IFQ holders,
whereas IFQ holders who are members of the same crab harvesting
cooperative can negotiate collectively with a single IPQ holder. An
affiliated IFQ holder could negotiate during the open negotiations
period, but individually, and not as part of a crab harvesting
cooperative. The proposed rule provides the period of open negotiations
would end at the date of the first crab fishing season for that crab QS
fishery in that crab fishing year. In effect, this removes the ability
of affiliated IFQ holders to negotiate contracts once the crab fishing
season has begun because they cannot use the negotiation methods in the
Arbitration System due to antitrust constraints.

Lengthy Season Approach

Rather than mediate immediately during the preseason, the Program
provides and the proposed rule would allow IPQ holders and Arbitration
IFQ holders to choose to adopt a ``Lengthy Season'' approach and
postpone negotiation of specific contract terms and binding arbitration
until during the regular season. If the parties reach a final agreement
on contract terms, binding arbitration is not necessary. If the parties
are unable to reach an agreement on whether to adopt a Lengthy Season,
they could request mediation or determine whether to adopt the
approach. If mediation is unsuccessful, the parties enter binding
arbitration to determine whether to adopt a Lengthy Season approach.

Share Matching Approach

To facilitate the ability of Arbitration IFQ holders to find IPQ
holders with available quota, the proposed rule implements the
Program's provision for a share-matching approach. Under the
proposed rule, 25 days prior to the date of the first crab fishing
season for that crab QS fishery in that crab fishing year, IPQ holders
would be required to make known to holders of uncommitted Arbitration
IFQ the amount of IPQ that is uncommitted and remains available. An
uncommitted Arbitration IFQ holder could match up its uncommitted IFQ
by indicating its intention to deliver its catch to a specific IPQ
holder with sufficient available uncommitted IPQ.
The Arbitration IFQ holder must offer the IPQ holder a substantial
amount of the Arbitration IFQ holder's uncommitted IFQ. While the
Program does not define ``substantial,'' the proposed rule defines
``substantial'' as not less than 50 percent of the Arbitration IFQ
holder's total uncommitted IFQ in order to prevent IPQ holders from
potentially coordinating countless arbitration sessions. After
matching, an Arbitration IFQ holder and IPQ holder could either
arbitrate or, at the discretion of both parties, try to mediate to
determine the contract terms. The Program and the proposed rule require
the IPQ holder to accept all proposed matches up to the amount of its
uncommitted IPQ.

Last Best Offer Binding Arbitration

The centerpiece of the Arbitration System is the last best offer
binding arbitration procedure. It would be available to resolve price
and delivery disputes arising from open negotiations among Arbitration
IFQ holders and IPQ holders, lengthy season approach, share matching or
performance disputes. Specifically, Arbitration IFQ holders and IPQ
holders would be eligible to participate in binding arbitration. As
with the other negotiation approaches, the role of the Contract
Arbitrator would be specifically detailed in the contracts among the
Arbitration Organizations and the Contract Arbitrator.
In a last best offer arbitration, the parties each would submit a
last best offer defining all the terms specified for inclusion in a
last best offer by the Contract Arbitrator. An Arbitration IFQ holder
that is a crab harvesting cooperative could submit a last best offer
that defines terms for the delivery of crab harvested by members of
that crab harvesting cooperative with IFQ held by the cooperative. The
Contract Arbitrator would choose one of the last best offers for price
made by the IPQ holder and IFQ holder(s). The arbitration
organizations' contract with the Contract Arbitrator would require that
the Contract Arbitrator base the decision on specific information,
including consideration of the factors in the Arbitration Standard, the
historical distribution of first wholesale revenues between fishermen
and processors, and the Market Report. The Contract Arbitrator also
could use information from previous arbitrations, the
non-binding price formula and other information provided to the
Contract Arbitrator by the parties to the arbitration. The Council
chose to adopt a last best offer arbitration with the intent that it
would deter parties from exaggerating their offers in hopes of
achieving a more favorable result.
The proposed rule provides that at any point more than 15 days
prior to the date of the first crab fishing season for a crab QS
fishery, an Arbitration IFQ holder or IPQ holder may initiate a binding
arbitration procedure. Prior to the submission of the last best offer,
the Contract Arbitrator would work with the parties to generate the
information the Contract Arbitrator would require for reaching a
decision. To minimize antitrust risk, the proposed rule reflects the
Council's change and provides that only the parties to the arbitration
and the Contract Arbitrators would have access to information provided
directly by the parties to the Contract Arbitrator for that particular
arbitration. To further preclude antitrust risk, the Program and the
proposed rule require the parties to sign a confidentiality agreement
stipulating they shall not disclose any confidential information
generated during the arbitration proceeding.
To ensure the parties understand their obligations as early as
possible, the Program requires the Contract Arbitrator to notify the
parties to an arbitration of the arbitration decision no later than 10
days before the season opening date. In order to implement that
provision, the proposed rule requires that if last best offers are
submitted at least 15 days before the first crab fishing season for
that crab fishing year for that crab QS fishery, the Contract
Arbitrator must issue arbitration decisions no later than 10 days
before the first crab fishing season for that crab fishing year for
that crab QS fishery. In effect, the Contract Arbitrator would have 5
days to render a decision in order to notify the parties 10 days before
the season opening date. The proposed rule provides that in other
situations, the Contract Arbitrator will notify the parties of the
arbitration decision within 5 days of the parties submitting their last
best offers.
The proposed rule provides that the arbitration decision would
result in a binding contract between the parties that could be enforced
by the parties to that contract, not NMFS. The parties would have to
agree to make the contract terms available, when requested, to
Arbitration IFQ holders with uncommitted IFQ to enable an IFQ holder to
determine whether to opt into the completed contract. The Contact
Arbitrator would need to provide this information within 5 days of
receiving the request for that information.
At its June 2004 meeting, the Council considered the antitrust
risks of sharing the arbitration results among IPQ holders or
affiliated IFQ holders or Arbitration IFQ holders that already have
committed to an IPQ holder. The Council agreed that such information
sharing would raise antitrust concerns regarding illicit price
stabilization or collusion. To the extent IFQ holders are members of a
crab harvesting cooperative under the FCMA, they are allowed to share
the information with other members of the same cooperative and set
prices with antitrust immunity.

[[Page 63234]]

However, sharing the results of arbitrations with IPQ holders or
affiliated IFQ holders or Arbitration IFQ holders that already
committed to an IPQ holder and so have no need to opt-in could
create serious antitrust risks. If IPQ holders shared the results of
completed arbitrations with other PQS or IPQ holders, they would risk
antitrust violations. Without antitrust immunity, sharing current
pricing information could facilitate illicit price stabilization or
collusion. Also, if IPQ holders shared the results of arbitrations
before all arbitrations were completed, an IPQ holder could alter its
final offer to the Contract Arbitrator to make it closer to the price
in previous arbitrations in a manner similar to what would occur if the
IPQ holders coordinated on prices.
Therefore, the proposed rule allows the disclosure of arbitration
results only to Arbitration IFQ holders that have not committed to an
IPQ holder so they have access to the real-time results of
completed arbitrations for purposes of determining whether to
opt-in to a completed contract. The information would be
provided to the Arbitration Organization of which the parties the
arbitration are members in order for the Arbitration Organization to
make such information available to the uncommitted Arbitration IFQ
holders.
The proposed rule also would require the Contractor Arbitrator to
provide NMFS, among other information, any last best offers made during
the binding arbitration process, including all contract details, the
names of participants in the arbitration, the arbitration decision and
the completed contract. This information is necessary for DOJ to carry
out its mandate under section 313(j)(6) of the Magnuson-Stevens
Act to determine whether any acts of anti-competition, antitrust
or price collusion have occurred among PQS or IPQ holders under the
Program.

Post Binding Arbitration Opt-In

The post binding arbitration opt-in provisions reflect the
Council's belief in the efficiency and fairness of the arbitration
procedure. The proposed rule reflects the Program's opt-in
provisions. The proposed rule allows a holder of uncommitted
Arbitration IFQ to opt-in to any contract that results from a
completed arbitration with any IPQ holder with available uncommitted
IPQ. To facilitate the process, the Program requires that IPQ holders
provide information regarding the amount of uncommitted IPQ they have
available. The proposed rule would require the arbitration
organizations to agree in their contract to establish a system to
ensure access to such information by Arbitration IFQ holders that have
uncommitted IFQ. All the same terms from the original contract would
apply. Once exercised, the opt-in is a binding contract.
To initiate the process, the Arbitration IFQ holder would notify
the IPQ holder and the Contract Arbitrator to the original contract of
its intent to opt-in, specifying the amount of IFQ involved, and
indicating acceptance of the terms of the original contract. However,
if a dispute arose regarding whether the opt-in offer was
consistent with the terms of the completed contract, the dispute could
be decided by the Contract Arbitrator who arbitrated the original
contract.

Performance and Quality Disputes

Building on the arbitration infrastructure, the Program provides
that performance and quality disputes that could not be resolved
through commercial channels could be arbitrated following procedures
similar to those laid out for binding arbitration. The disputes could
be raised at any point in time prior to the commencement of the first
crab fishing season for the following crab fishing year in that crab
fishery. Meanwhile, when disputes over the quality of the harvested
crab arise within the context of an existing contract, if the parties
employed a formula-based price, the proposed rule provides they
each will receive their share of the value of the amount of crab
delivered based on the provisions of the contract. When the Arbitration
IFQ holder prefers to use actual ex-vessel price and not a
formula-based price and a dispute arises regarding crab quality
and price, the dispute should be referred to a mutually agreeable
independent quality specialist firm with both parties sharing the
costs.

Payment of Costs for Arbitration

The Program provides that the costs of the market analysis and the
arbitrators must be shared by the two sectors. The proposed rule
interprets that provision to require the costs of the Arbitration
System to be shared equally by all IPQ holders and Arbitration IFQ
holders and Class A IFQ holders. The costs of the system would include
all costs of the Market Analyst, Formula Arbitrator and Contract
Arbitrator, dissemination of information concerning uncommitted IPQ to
holders of uncommitted Arbitration IFQ, and the costs of such person
associated with lengthy season approach, share matching approach,
binding arbitration, and quality and performance disputes.
The proposed rule requires the arbitration organizations to develop
a system to determine such costs, assess them equally among the
participants, and collect the fees. The proposed rule provides that
such costs must be shared based on the amount of IPQ or IFQ held by
each person and that the costs must be divided so that the IPQ holders
pay 50 percent of the costs and the Arbitration IFQ and Class A IFQ
holders pay 50 percent of the costs. Consistent with the Program, PQS
holders would be required to advance all costs and collect the
contribution of Class A IFQ holders at landing subject to terms
mutually agreed upon by the arbitration organizations.

Monitoring and Catch Weighing Requirements for Catcher/Processors,
Registered Crab Receivers, and Catcher Vessels

NMFS has identified three primary objectives for monitoring catch
in rationalized fisheries. First, monitoring must ensure independent
verification of catch weight, species composition, and location data
for every delivery by a catcher vessel or every pot by a CP. Second,
all catch must be weighed accurately. Third, the system must provide a
verifiable record of the weight of each delivery.
To effectively manage the crab fisheries, NMFS must have data that
will provide reliable independent estimates of the total catch by quota
sector for all crab harvested. Because participants are operating under
their own IFQ, they have a strong interest in ensuring that catch data
do not overestimate the amount of crab harvested. Based on experience
gained under other quota-based programs, NMFS anticipates
estimates of catch will be questioned frequently by industry. Further,
individual harvesters and processors would benefit directly if catch is
under reported because each processor or vessel is operating under an
individual allocation. For these reasons, NMFS is proposing a
catch-weighing system for the crab fisheries under this Program
that is more rigorous than that required in non-rationalized
fisheries.
In order to implement the Program, NMFS proposes new monitoring and
catch weighing requirements for RCRs taking deliveries of crab, catcher
vessels harvesting crab, and CPs catching and/or harvesting crab. These
proposed new requirements are summarized in the following table:

[[Page 63235]]

Table 14--Summary of Monitoring Requirements for Crab Fishery
Participants
------------------------------------------------------------------------
Catcher
RCR Taking Catcher Vessel Processor
Requirement Deliveries of Harvesting Crab Harvesting or
Crab Processing Crab
------------------------------------------------------------------------
Weigh all Yes. On a scale No. Yes. On a scale
retained quota approved by the approved by
by quota State in which NMFS.
category prior the RCR is
to processing. located.
------------------------------------------------------------------------
Scale testing Yes. On demand. N/A Yes. Scale must
requirements. be tested daily
when use is
required.
------------------------------------------------------------------------
Printed record of Yes. N/A Yes. Printed
scale weights. record of scale
weights for
unprocessed
crab as well as
for processed
product.
------------------------------------------------------------------------
Operate under an Yes. No. No.
approved catch
monitoring plan
(CMP).
------------------------------------------------------------------------
Offload No. Yes. All Yes. All product
requirements. offloads must must be
be to an RCR. offloaded on
Vessel may not shore.
leave RCR until
reporting of
offload is
completed.
------------------------------------------------------------------------
Product weighing No. N/A Yes. All product
requirements. must be weighed
on a scale
approved by the
State in which
product offload
takes place.
------------------------------------------------------------------------
Vessel Monitoring N/A Yes. Yes.
System (VMS)
requirements.
------------------------------------------------------------------------
Provide Observer No. No. Yes.
work station.
------------------------------------------------------------------------

Catcher/Processors Catch-Weighing and Monitoring Requirements

NMFS proposes to require all crab IFQ harvested and processed by
CPs be weighed at-sea prior to processing. These catch weighing
requirements include the following:
(1) Scales must meet the performance and technical requirements
specified in appendix A to part 679. At this time, NMFS has approved
scales produced by Marel hf and Skanvaegt International A/S for
weighing total catch. Marel hf, Skanvaegt International A/S and Pols hf
manufacture scales that have been approved for use by observers.
(2) Each scale must be inspected and approved annually by a
NMFS-approved scale inspector.
(3) Each observer sampling scale must be accurate within 0.5
percent when its use is required.
(4) The observer sampling scale must be accompanied by accurate
test weights sufficient to test the scale at 10, 25 and 50 kg or, if
the scale is denominated in pounds, at 25, 50 and 100 lb.
(5) Each scale used to weigh crab must be tested daily. Automatic
hopper scales must be tested at their minimum and maximum capacity
using certified test weights. Flow scales must be tested with no less
than 400 kg of fish or other test material.
(6) When tested, a flow scale and the observer sampling scale must
agree within 3 percent. An automatic hopper scale must be accurate
within 2 percent when compared with the known weight of the certified
test weights.
(7) Scales must produce a printed record of all crab retained by
the vessel. This record must be printed no less than once every 24
hours when use of the scale is required.
In other programs where NMFS requires all catch be weighed
at-sea, NMFS also requires that an observer be on duty whenever
catch may be weighed. Because fishing operations occur on a 24 hour
basis, this generally requires that the vessel carry two observers.
This is necessary because no catch-weighing system is tamper
proof and NMFS ensures that all catch is being weighed by requiring an
observer to be on duty at all times. This allows NMFS to audit the
vessel's reported weight of groundfish against the observer's data.
However, the crab fisheries differ from the groundfish fisheries in two
important ways. First, the final Council motion establishing the
Program delegated observer coverage responsibility to the State of
Alaska, and, at this time, the State requires CPs to provide only a
single observer. Second, crab are far more valuable per pound than
groundfish. Thus, while it is probably not practical for vessel crew to
attempt to bypass the scale with groundfish, it may be more tempting to
do so with a comparatively high value product such as crab. Because of
these differences, NMFS believes crab weights must be audited at the
point of offload. This would require a crab CP to offload all product
shoreside at a designated port and weigh that product on a scale
approved by the State in which the offload takes place. These offload
product-weighing requirements include the following:
(1) Offload all product to a shoreside location in the United
States accessible by road service or regularly scheduled air service.
(2) Weigh all product on a scale approved by the State in which the
RCR is located, which must be equipped with a printer.
(3) Report the total weight of the offload to NMFS.
Observer sampling stations provide a location where observers can
work safely and effectively. While the Program delegates observer
coverage requirements to the State of Alaska, NMFS believes a quota
type program necessarily imposes new duties on observers because of the
increased season length and subsequent need to be on station more
often. In spite of the requirements detailed above for full accounting
of product, observers would still play an important role in ensuring
catch weights are accurately reported. In order to facilitate these
duties, NMFS is proposing to require vessels to provide minimal work
areas and facilities for the

[[Page 63236]]

use of the observer. NMFS proposes to require that CPs provide the
following for observers:
(1) An observer work area for sampling unsorted crab. The work area
must be no less than 6 square meters and no less than 1 meter on each
side. The work area must be located within 3 meters of where the vessel
crew sort crab.
(2) An observer work area for sampling retained crab. The work area
must be no less than 1 meter on each side. The work area must be
located downstream from the scale used to weigh total catch and
upstream from the area where crab are processed.
(3) The observer work area for sampling retained crab must be
provided with a NMFS-approved motion compensated platform scale
located within 5 meters of the work area. Clear and unobstructed
passage must be provided between the scale and the observer work area.
The scale must be accompanied with certified test weights sufficient to
test the scale at 10, 25 and 50 kg (or 25, 50 and 100 lb if scale is
denominated in lb). The scale may also be used by vessel crew, but must
be available to the observer at all times.
(4) Both observer work areas must be protected from extreme weather
and unusual safety hazards.
(5) Vessel crew may use both observer work areas, but the entire
area must be available to the observer whenever the observer is
working.
(6) The vessel owner must prepare a diagram, drawn to scale,
showing the location of both observer work areas. The diagram must be
retained on board the vessel whenever the vessel is harvesting or
processing crab quota.

Registered Crab Receivers Catch-Weighing and Monitoring Requirements

This proposed rule would establish a new catch monitoring system
for RCRs. The catch management goals established by NMFS for the crab
fisheries are the same for the inshore and offshore sectors. However,
NMFS does not believe the regulations developed for CPs are adequate
for inshore processors and other RCRs for two reasons. First, inshore
processors vary more in size, facilities and layout than do CPs.
Second, the State is responsible for approving scales used for trade
within the State in which the landing is made and has developed an
effective program for their inspection and approval.

Catch Monitoring Plans

The catch monitoring system developed by NMFS for CPs is based on a
standardized system of round weight accounting and offload monitoring.
Because of the wide variation among RCRs, NMFS believes a
performance-based catch monitoring system is more appropriate
for this sector. Under this system, each RCR would be required to
submit a Catch Monitoring Plan (CMP) to NMFS for approval. The CMP
would detail how the RCR would meet the following standards for each
location where crab would be received:
(1) All crab, including crab parts, and dead or otherwise
unmarketable crab, must be sorted and weighed by quota category. The
CMP must detail how and where crab are sorted and weighed.
(2) Scales used for weighing crab must be identified by serial
number.
(3) Scales identified in the CMP must be accurate within specified
limits. For each scale identified in a CMP, a testing plan must be
developed showing how the RCR will test the scale, where the required
test weights are located, and what personnel are responsible for scale
testing.
(4) A printed record of the weight of each delivery must be
produced. A sample copy of the printed record must be included in the CMP.
(5) The CMP must designate an observation area. The observation
area is a location where an individual may monitor the offloading and
weighing of crab during a delivery. From the observation area, an
individual must have an unobstructed view or be able otherwise to
monitor the entire offload of crab between the first location where
crab are removed from the boat and a location where all sorting has
taken place and all quota has been weighed. The observation area must
be accessible to authorized personnel, be sheltered from the weather,
and not be exposed to undue safety hazards.
(6) The CMP must designate a plant liaison. The plant liaison is
responsible for orienting new observers or NMFS-authorized
personnel to the plant, assisting in the resolution of NMFS or observer
concerns, and informing NMFS if changes are made to the CMP.
(7) The CMP must be accompanied by a scale drawing of the plant
showing where crab are removed from a delivering vessel, the
observation area, all scales used to weigh crab, and each location
where crab is sorted.
(8) All offloading and weighing locations detailed in the CMP must
be located on the same vessel or in the same geographic location. If a
CMP describes facilities for the offloading of vessels at more than one
location it must be possible to see all locations simultaneously.
Each CMP location would be inspected by NMFS or NMFS authorized
personnel to ensure the layout conforms to the elements of the plan. A
CMP that meets all of the standards would be approved by NMFS for 1
year, unless during the year changes are made in plant operations or
layout that do not conform to the CMP. After 1 year, NMFS would review
the CMP with plant management to ensure the CMP has been implemented
and the standards continue to be met.
Proposed catch weighing standards for CPs are based on the use of
scales approved by NMFS. Because Federal and State scale approval
standards differ, most NMFS-approved scales are not legal for
trade in most States and most State-approved scales do not meet
NMFS criteria for inseason testing and auditing. NMFS believes the
State in which the landing is made should be the primary authority
responsible for approving and testing scales located onshore or on
vessels anchored inside the territorial sea and that weighing crab
delivered inshore on scales approved by NMFS is unnecessary. Under
existing State regulations, crab buyers and processors are required to
weigh all catch that is bought or sold on State-approved scales.
In most states, including Alaska, these scales must be inspected
annually by State-authorized inspectors.However, State
regulations generally do not provide for inseason testing of scales nor
do they require that scales produce a printed record of each delivery.
NMFS believes these are essential features of an acceptable catch
weighing system. Therefore, NMFS has developed a catch-weighing
system that implements these additional features within the existing
framework of State scale inspection and approval.
Thus, this proposed rule reflects cooperative State and Federal
development of catch weighing requirements for RCRs and includes the
following provisions:
(1) As described above, each RCR would be required to submit a
scale testing plan as part of its CMP that describes the procedure the
plant will use to test each scale identified in the CMP. The testing
plan would list the test weights and equipment required to test the
scale, where the test weights and equipment are stored, and the names
of the plant personnel responsible for testing the scale. Test amounts
for various scale types are shown in Table 15.
(2) Test weights would have to be certified at least biannually by
a metrology laboratory approved by the

[[Page 63237]]

National Institute of Standards and Technology (NIST).
(3) NMFS or NMFS-authorized personnel could request that any
scale be tested in accordance with the testing plan, provided the scale
had not been tested and found accurate within the past 24 hours.
(4) Each scale would have to be accurate within the limits
specified in Table 15 when tested by the plant staff.
(5) Each scale used to weigh catch must be equipped with a printer
to provide a printout or printouts showing the total weight of each
delivery, which would have to be generated after each delivery had been
weighed. The printouts must be retained by the plant and made available
to NMFS-authorized personnel, including observers. See Tables 15
and 16 for details:

Table 15--Test Weight and Test Load Amounts That Would be Required to
Perform Inseason Testing on Various Scale Types and Capacities
------------------------------------------------------------------------
Scale Type Capacity\1\ Test Weights\2\ Test Loads\3\
------------------------------------------------------------------------
Automatic Hopper 0 to 150 kg Minimum Minimum\1\
Weighment\1\ or
10 kg,
whichever is
greater
------------------------------------------------------------------------
................. Maximum\1\ Maximum\1\
------------------------------------------------------------------------
Automatic Hopper >150 kg Minimum Minimum\1\
weighment\1\ or
10 kg,
whichever is
greater
------------------------------------------------------------------------
................. 25 percent of Maximum\1\
Maximum\1\ or
150 kg,
whichever is
greater
------------------------------------------------------------------------
Platform or 0 to 150 kg 10 kg Not Acceptable
flatbed
------------------------------------------------------------------------
................. Midpoint ................
------------------------------------------------------------------------
................. Maximum\1\ ................
------------------------------------------------------------------------
Platform or >150 kg 10 kg Not Acceptable
flatbed
------------------------------------------------------------------------
................. 12.5 percent of 50 percent of
Maximum\1\ or Maximum\1\ or
75 kg, 75 kg,
whichever is whichever is
greater greater
------------------------------------------------------------------------
................. 25 percent of 75 percent of
Maximum\1\ or Maximum\1\ or
150 kg, 150 kg,
whichever is whichever is
greater greater
------------------------------------------------------------------------
\1\These amounts will be shown on the scale marking plate.
\2\Test Weights are weights that have been approved by a NIST-approved
laboratory.
\3\Test load is any combination of approved test weights and other
material specified in the scale testing plan. Test material other than
test weights must be weighed on an accurate observer platform scale at
the time of each use.

Table 16--Proposed Maximum Permissible Errors for Inseason Scale
Testing\1\
------------------------------------------------------------------------
Maximum Error in Scale
Test Load in Scale Divisions\2\ Divisions
------------------------------------------------------------------------
0-500 1
------------------------------------------------------------------------
501-2,000 2
------------------------------------------------------------------------
2,001-4,000 3
------------------------------------------------------------------------
>4,000 4
------------------------------------------------------------------------
\1\Maximum permissible errors and testing procedure for inseason testing
are not the same as for State scale approval. A scale that is accurate
for the purposes of inseason testing may or may not be accurate enough
to be approved by the State.
\2\Division size is shown on the scale's marking plate.

Catcher Vessels Catch Monitoring Requirements

Under this proposed rule, NMFS is not requiring catcher vessels to
weigh their own catch. Rather, the proposed catch-accounting system
would be based on data received from the RCR. Because this is the
location where all non-CP catch accounting would take place,
NMFS would require that all crab retained by a catcher vessel be landed
to an RCR. The proposed regulations do not make any exceptions for
activities such as dockside sales or tendering. Thus, if a holder of
CVO or CVC IFQ wished to sell their own catch to the general public,
the quota holder would be required to be an RCR and to conduct the
offload of crab from the vessel in accordance with the requirements
described above for an RCR.

Interagency Electronic Reporting System (IERS)

The RCR would obtain at his or her own expense, hardware, software,
and Internet connectivity to support Internet submissions of the crab
rationalization (CR) crab landing report on the IERS.
IERS application for user ID. Each RCR permit holder would submit a
data-entry application to the Regional Administrator to provide
information needed to process account access into the IERS. The IERS
will provide a web page where the applicant would enter information.
The IERS would confirm that all required information is submitted, that
the information entered is in correct format, and also that the
requested user ID is not already in use. The IERS would generate a PDF
document from the information entered by the applicant. The user would
sign and submit the form. An Agency IERS staff would review the form,
confirm that the user should be authorized for the system, and would
activate the user on the IERS. The IERS would then send the user(s) an
email telling them they can now use their new user ID.
CR Crab Landing Report. The CR crab landing report (internet
version and fax version) would be submitted through the IERS, which is
the result of collaboration among NMFS Alaska Region, International
Pacific Halibut Commission, and State of Alaska, Department of Fish and
Game (ADF&G). The CR crab landing report is the first step of a
complete, unified IERS that would be extended in future years to the
groundfish fisheries, IFQ, and CDQ halibut fisheries. This internet
report would replace the paper ADF&G fish ticket for debiting CR crab
landings. All

[[Page 63238]]

retained CR crab catch would be weighed, reported and debited from the
appropriate IFQ or IPQ account under which the catch was harvested or
received, as appropriate. The IERS is a more convenient, accurate, and
timely method of reporting.
Additionally, the proposed IERS would provide continuous access to
IFQ and IPQ accounts. These provisions would make recordkeeping and
reporting requirements less burdensome on participants by allowing
participants to more efficiently monitor his or her accounts and
fishing activities.

Catcher/Processor Offload Report

An RCR receiving CR crab that were harvested and processed by a CP
must complete a CP offload report at the time of offload and attach a
scale printout showing gross product offload weight. Crab weights must
be audited at the point of offload. This report would allow audit
comparisons of catch accounting information between the vessel's
reported weight of crab with the observer's data.
ECCO Annual Report for an ECC (see Approval criteria for an
Application for Transfer of QS/IFQ to or from an ECCO).

Vessel Monitoring System (VMS) Requirements

Under the proposed rule, a vessel that harvests crab in the crab
fisheries, including a vessel harvesting CDQ or Adak allocations, would
be required to have aboard an operating NMFS-approved VMS
transmitter at any time when the vessel has crab gear on board. These
transmitters automatically determine the vessel's location several
times per hour using Global Positioning System (GPS) satellites and
send the position information to NMFS via a mobile communication
service provider. The VMS transmitters are designed to be
tamper-resistant and automatic. The vessel owner should be
unaware of exactly when the unit is transmitting and would be unable to
alter the signal or the time of transmission.
NMFS believes a VMS system is an essential component of a
rationalized crab fishery. A VMS system would allow NMFS to verify
where fishing is taking place and ensure that vessels harvesting crab
were permitted to do so and that harvested IFQ is properly debited. A
VMS system also allows NMFS to track vessels as they arrive in port to
offload crab or crab product. This helps to ensure all landings are
properly made to an RCR and the landing is properly debited from the
IFQ holder's account.
NMFS has approved VMS system components manufactured by several
vendors. Additional details concerning these VMS components may be
found in the NMFS' notice of approval of these VMS components published
in the Federal Register on April 15, 2004 (69 FR 1986).

Economic Data Collection

The Program includes a comprehensive economic data collection
program to aid the Council and NMFS in assessing the success of the
Program and developing amendments necessary to mitigate any unintended
consequences. The data would be used to study the economic effects of
the Program on harvesters, processors, and communities. Participation
in the data collection program would be mandatory for all participants
in the fisheries.
The Magnuson-Stevens Act authorizes a mandatory economic
data collection system that would provide analysts with information
necessary to study the impacts of the Program and to ensure the Program
would equitably distribute benefits between the harvesting and
processing sectors and provide a stable economic environment. The
Magnuson-Stevens Act also authorizes NMFS to supply economic
data to the Federal Trade Commission (FTC) and the Department of
Justice (DOJ) for analysis by those agencies. The authority to collect
a wide variety of economic data from both harvesters and processors is
exclusive to the crab fisheries.

Selection and Scope of Work for the Data Collection Agent

To address concerns for strict control over sensitive economic
data, collection of economic data would not be performed by NMFS but by
a third-party agent, or Data Collection Agent. NMFS has
determined the Pacific States Marine Fisheries Commission (Pacific
States) would be the Data Collection Agent, although NMFS is authorized
to select any appropriate entity. NMFS would establish the regulatory
structure for mandatory submission of economic data by harvesters and
processors. Pacific States would establish systems for the collection
and compilation of the data.
Pacific States, in a cooperative agreement or another form of a
procurement agreement with NMFS, would be authorized to collect data,
ensure confidentiality of the data by following all statutory and
regulatory data confidentiality guidelines, and release the data to
NMFS and other authorized users. Among other duties, Pacific States,
acting as an agent for NMFS, would identify submitters, forward EDRs to
submitters and collect the data. Once received, Pacific States would
act as a storehouse for the data and provide it only to authorized
users and only in authorized form.
In instances where NMFS economists, Council staff, or other
authorized users accessing the data for crab management analysis or
report purposes request data, Pacific States would furnish them but
eliminate or remove the identifiers for the submitter. This would make
the data ``blind'' to these users. However, if the data are requested
by NMFS Enforcement, NOAA GC, RAM, DOJ, or FTC, and the purpose is
connected to law enforcement or qualification for QS, PQS, IFQ, IPQ,
and other Federal permits, Pacific States would provide the data and
the identity of the submitter.
Pursuant to a procurement agreement with NMFS, Pacific States would
be authorized to establish a method and protocol for ensuring accuracy
of the data submissions. Measures to verify the accuracy of the data
would include consultation with NMFS economists and analysts to
ascertain anomalies, outliers, and other deviations from averaged
variables. The principle means to verify data would be consultation
between Pacific States staff and the submitter when questions arise
regarding data. To assure timely resolution of verification
consultations, submitters would be required to respond to Pacific
States inquiries within 15 days. Pacific States would request oral or
written confirmation of data submissions and request copies of or
review documents or statements that would substantiate data
submissions. Data in EDRs would be amended by Pacific States in
response to submitter requests and the results of the follow-up
verification processes.
EDR audits would occur either through random selection or when
circumstances require more thorough review of the submissions. Pacific
States, in instances where a random audit occurs or an audit is
otherwise justified, would retain a professional auditor/accounting
specialist who would review and request financial documents
substantiating economic data that is questioned. In an instance where
data cannot be verified or concerns resolved by Pacific States, NMFS
would request referral of the matter to the auditor for further
disposition.
Pacific States would provide support for arbitrators for binding
arbitration. If an arbitrator is involved in price determinations for
parties to binding arbitration, Pacific States would, at the request of
a binding arbitrator, supply

[[Page 63239]]

detailed revenue, landing, and production data to the binding
arbitrator. The information supplied to the arbitrator by Pacific
States would be aggregated so as to avoid releasing confidential
information.

Type of Data to Be Submitted

Cost, revenue, production, and ownership data would be submitted in
an EDR. Relevant state and local fishing-related taxes would be
reported. The data would assist in the analysis of the variable costs
of processors and harvesters. Data on fixed costs would not be
collected unless such data informs the analysis of industry variable
costs. NMFS would require submission of data recommended for collection
by the Council's data collection committee. This committee reviewed
NMFS' economist's data surveys and proposed additional data to be
collected. The surveys that resulted from the committee deliberations
are the foundation for the EDRs.
To analyze local and regional seafood employment, owners and lease
holders of vessels submitting annual EDRs would submit State of Alaska
crew license numbers and Commercial Fisheries Entry Commission permit
serial numbers of their harvesting and processing employees.
Additionally, identification of number of employees or crew, and their
home state or country would be provided in the EDRs.
There would be two variations of the EDRs, an historic EDR and an
annual EDR. The first would require submission of
historical-based economic data. Historical data would capture
economic data from 1998 through 2004. It would capture
pre-Program implementation data for comparison to the economics
of harvesting and processing before and after Program implementation.
The annual EDR would capture economic data on an annual basis at the
conclusion of each calendar years' crab fisheries.
For a crab harvester or CP, the annual EDR data collection system
is based on collection of data relating to costs and revenues for a
vessel. For crab processing entities, the data collection system is
based on collection of costs and revenues for a processing company or
plant. Processor submitters would distinguish data stemming from custom
processing and business with affiliated processors from otherwise
standard operations data.
The EDR forms would be accessible to submitters on the NMFS Alaska
Region website at http://www.fakr.noaa.gov . Persons may
download the form to complete manually or may complete it electronically
on the website. Paper copies of the forms would also be mailed directly
to identified persons. Persons would submit the completed EDRs to
Pacific States.

Who Must Provide an EDR

Participants in the crab fishing industry harvesting or processing
fish under Magnuson-Stevens Act authority after enactment of
Pub. Law 108-199 on January 23, 2004, would submit data in the
EDR. The members of the crab industry include a potentially broad range
of individuals, corporations, partnerships, and other business
formations. Both owners and lessees of fishing vessels and processing
operations would be responsible for submission of the EDR.
Because of the contractual nature of leasing vessels or processing
operations, whether someone has leased a vessel or processing operation
remains a private business matter and not apparent to NMFS. To
ascertain leasing arrangements and determine who is a lessee that
should submit an EDR, NMFS would be requiring the lessors to identify
his or her lessees in the EDR and QS or transfer applications.
Some members of the harvesting and processing industry who NMFS has
the authority to require submission of an EDR would not be required to
submit an annual EDR. Persons who hold QS, such as those who hold CPC
QS, that do not own or lease a vessel, would not be required to submit
an annual EDR. Additionally, harvesters and processors of crab not
included in the Program, such as Norton Sound red king crab, would not
be obligated to submit annual or historic EDRs for that crab.
For catcher vessels owners submitting historic data, there would be
a sample based selection of owners of these vessels for submission of
any 3 years selected between1998 through 2004. Catcher vessel owners
would not be required to submit historical data for all years 1998
through 2004 because of the extraordinary reporting burden this would
entail. A notice published in the Federal Register would identify each
vessel selected for submission of catcher vessel historical data. The
owner or lessee of the vessel would be required to submit the EDR.
Catcher/processor EDRs would consist of one form for annual data
and one form for historical data and would not require submission of
both ``harvester'' and ``processor'' EDRs, unless, the person owned or
leased a vessel that also operated as a catcher vessel during the
specified year. The submitter of the historical EDR for a CP would be
the owner or lessee of a vessel that made at least one landing of crab
in the years 1998, 2001, or 2004, as there is an insufficient number of
CPs to apply a sample based selection submission requirement.
For shore-side and stationary floating processors, the
submitter of the EDR would be the owner or lessee of a processing
company consisting of one or more fish processing plants. For
processors, the submission of the EDR is required if they qualified for
or received QS, PQS, IFQ, or IPQ. Data would be reported for individual
plants owned by the submitter. For historical data submissions, owners
or lessees of processing companies processing crab in 1998, 2001, or
2004, and who would be participating in the Program, would be required
to submit these data in the EDR.
NMFS has determined that there are persons that do have historic
data from the years 1998 to 2004 that would not be required to submit
an EDR. The effect of eliminating this historical data on the 18 month
and 3 year review of Program is not possible to determine at this time,
but would be better understood at the conclusion of the verification
process for historical EDR data.
The owner or lessee of the fishing vessel or processing company
required to submit the EDR may appoint a contact individual, who on his
or her behalf, would respond to inquiries and verification processes
from Pacific States regarding data and the EDR.
Because EDR submission is mandatory, NMFS must ensure there are
compliance incentives. In addition to incentives to avoid enforcement
actions, another incentive would be to withhold issuance or transfer of
IPQ, PQS, IFQ, or QS should a submitter fail to submit an EDR. For
example, if a prior year's EDR is not submitted by a crab IFQ applicant
who was obligated to submit the EDR, the permit application would be
considered incomplete by NMFS, the permit application denied and an IAD
issued setting forth the facts, a discussion and determination. Upon
issuance of the IAD, NMFS may withhold issuance of any new IFQ or IPQ
and disapprove any transfer of IFQ, IPQ, and/or QS, PQS to or from a
permit holder until final agency action. An aggrieved permit or
transfer applicant could appeal an IAD through the Office of
Administrative Appeals (OAA) in NMFS as described at Sec. 680.43. An
IAD that is not appealed within 60 days of issuance of the OAA, would
become a final agency action. To facilitate NMFS' determination of
whether an application is complete by virtue of completion of a prior
years' EDR, Pacific States would inform NMFS of the status of EDR
submissions. If the application was

[[Page 63240]]

otherwise complete, NMFS would provide the permit for IFQ or IPQ once
the submitter files the EDR with Pacific States.

Submission Deadlines for EDRs

Submission deadlines for both historical and annual EDRs would
correspond with availability of the data to the submitters, providing
sufficient time for preparation, and providing NMFS with sufficient
time to prepare reports based on the data for Program review. NMFS
would require an annual EDR be submitted each year on or before May 1,
encompassing the previous calendar year. An EDR for historical data
would be submitted no later than 60 days after the effective date of
the final rule. The EDR for catcher vessel historic data would be
required to be submitted within 60 days of publication of a Federal
Register notice identifying vessels that must submit historic data to
Pacific States.

DOJ/FTC Review of the Program

Section 313(j)(6) of the Magnuson-Stevens Act states there
is no waiver of the anti-trust laws of the United States for
persons receiving PQS. Anti-trust laws include the Sherman Act,
(15 U.S.C. sec. 1, et seq.), the Clayton Act, (15 U.S.C. sec 12, et
seq.), and the Federal Trade Commission Act (15 U.S.C. sec. 41, et
seq.). The Federal anti-trust laws are enforced by criminal and
civil enforcement actions brought by the Antitrust Division of the DOJ,
and civil enforcement actions brought by the FTC.
Although the Program proposes caps and limitations on the
accumulation and holding of PQS, there remains potential for
consolidations resulting in anti-competitive conduct or price
collusion. To the extent possible through information collectible in
the Program and to reduce the potential for violations of the
anti-trust laws and related concerns, the Program would provide
for review of processor activity by DOJ, or FTC. This information would
assist analysis of consolidations and market impacts of processor
activities.
Pursuant to section 313(j)(6) of the Magnuson-Stevens Act,
NMFS has consulted with DOJ and FTC to develop and implement a system
for accessing data and information DOJ and FTC have identified as
helpful to them. In general, access to collected information in the
Program would shorten investigation time by DOJ or FTC and possibly
lead to earlier detection of anti-competitive conduct. Access to
the information would be for the perpetuity of the Program. Should DOJ
and FTC require additional information in the future, NMFS would take
appropriate actions to provide for its collection to the extent
authorized under the Magnuson-Stevens Act.
To assist determination of whether anti-competitive conduct,
price collusion, or violations of the anti-trust law exist, the
Program, principally through memorandums of understanding and
administrative precesses, would authorize and allow access to data and
information to DOJ or FTC. When either DOJ or FTC request information
held by NMFS or any NMFS agent, access to it would not be conditioned
or restricted, and access would be contemporaneous with the request, or
provided routinely through a data report. For example, Pacific States,
who would be a NMFS agent for collection of economic data from members
of the crab harvesting and processing industry, would provide DOJ and
FTC access to these data. DOJ and FTC would also have access to the
identity of the submitters of the data both for the economic data and
any other information held by NMFS or its agents.
The information that would be available to DOJ and FTC includes the
following: all data submitted in EDRs by any submitter, including
catcher vessel owners and lessees, and all varieties of processors,
including owners and lessees of processing entities. All QS holder
information would be accessible by DOJ or FTC. This includes
information required by and provided in permit applications, transfer
of QS , and related forms submitted to RAM. If an application requires
submission of a copy of a contract for sale of QS or a permit for
annual issuance of IFQ or IPQ, a copy of such contract could be
accessed by DOJ or FTC.

Cost Recovery and Fee Collection

Section 304(d)(2)(A) of the Magnuson-Stevens Act requires
the Secretary to ``collect a fee to recover the actual costs directly
related to the management and enforcement of any...individual fishing
quota program [or]
community development quota program.'' As a quota
program, the Program must follow the statutory provisions set forth by
section 304(d) and section 313(j) of the Magnuson-Stevens Act.
Paragraphs 304(d)(2)(B) and (C) of the Magnuson-Stevens Act
specify an upper limit on fees, when the fees must be collected, and
where the fees must be deposited. Section 303(d)(4) of the
Magnuson-Stevens Act allows NMFS to reserve up to 25 percent of
the fees collected for use in a loan program to aid in financing the
purchase of quota by entry-level and small-vessel
fishermen.
The Magnuson-Stevens Act specifies the following with
respect to the imposition of cost-recovery fees:
(1) Fees are collected to recover actual costs directly related to
actual enforcement and management of an individual fishing quota
program or community development quota program that allocates a
percentage of the total allowable catch of a fishery to such program;
(2) Fees must not exceed 3 percent of ex-vessel value;
(3) Fees collected under this program are in addition to any other
fees charged under the Magnuson-Stevens Act;
(4) With the exception of money reserved for the loan program, fees
must be deposited in the Limited Access System Administrative Fund
(LASAF) in the U.S. Treasury; and
(5) Fees must be collected at either the time of a legal landing of
harvested fish, filing of a landing report, or the sale of such fish
during a fishing season or in the last quarter of the calendar year in
which the fish are harvested.
Section 313(j) of the Magnuson-Stevens Act provides that the
Secretary will approve a cost recovery program for the Program,
conducted in accordance with the existing halibut and sablefish cost
recovery program. Similar to the halibut and sablefish cost recovery
program, the Crab Rationalization cost recovery program would allow for
the collection of actual management and enforcement costs up to 3
percent of ex-vessel gross revenues and a loan program based on
25 percent of the fees collected.
Section 313(j) provides several additional provisions specific to
the cost recovery program to accommodate the processing component of
the Program and to address problems experienced under the halibut and
sablefish cost recovery program. Unique to Crab Rationalization, the
Council authorized the collection of 133 percent of actual costs of
management, which would provide for fuller reimbursement of the
management and enforcement costs of the program after allocation of 25
percent of the cost recovery to the loan program. Additionally, the
Council provided that cost recovery fees would be paid in equal shares
by the harvesting and processing sectors and that CPs, being a
combination of both sectors, would pay the full fee percentage.

Cost Recovery Program Description

NMFS developed the cost recovery program in conformance with
statutory requirements and to provide for partial

[[Page 63241]]

compensation to the agency for the added costs of management and
enforcement of the Program. Key provisions of the cost recovery program
include (1) a new definition and application of ``fee liability,'' (2)
the establishment of an RCR permit system to streamline management and
reporting, (3) the establishment of a ``crab fishing year'' for
biological and administrative purposes, and (4) a new administrative
process that requires the collection and submission of fees by RCRs
rather than requiring separate billings for each individual crab
rationalized allocation (crab allocation) holder. The crab allocations
include IFQ, Crew IFQ, IPQ, CDQ, and the Adak community allocation.
This system would impose less of an administrative burden on the
industry as a whole, provide more efficiency in the agency
administrative process, and reduce the overall cost of managing the
Program.
Generally, any crab allocation holder would incur a cost recovery
fee liability for every pound of crab landed in the crab fisheries. The
RCR permit holder would be responsible for collecting any fee liability
for the crab allocation holder landing crab and self-collecting
any fee liability for all crab landed at that facility. Under a CDQ or
the Adak community allocation, the harvester delivering the crab on
behalf of the community entity to the RCR would be responsible for
paying the harvester share of the fee liability at the time of landing
to the RCR. The RCR permit holder would be responsible for submitting
this payment to NMFS on or before the due date of July 31 following the
crab fishing year in which payment for the crab was made. The dollar
amount of the fee due would be determined by multiplying the fee
percentage (not to exceed 3 percent) by the ex-vessel value of
crab debited from the allocation.

Registered Crab Receiver

NMFS determined the need for a focal point for landing crab to
ensure proper monitoring and enforcement of the rationalized fishery.
Subsequently, NMFS determined that, under the Program, it must identify
and receive reporting from all entities that receive and/or process
crab. As a result, NMFS concluded that all persons who receive and/or
process crab must apply for and possess an RCR permit before receiving
any crab. This designation would ensure that all processors who receive
crab, whether or not they possess IPQ, would be responsible for any fee
liabilities associated with any crab received by those processors.

Fee Percentage

Three percent of the ex-vessel value of crab harvested under
a quota program is the maximum fee amount allowed by section
304(d)(2)(B) of the Magnuson-Stevens Act. This proposed rule
would set a 3 percent fee at the start of each crab fishing year, but
would allow the Regional Administrator to reduce the fee percentage if
actual management and enforcement costs could be recovered by using a
smaller percentage. NMFS recognizes that in order for fishermen to
budget their costs, they need to know the fee percentage that would
apply to any crab deducted from a crab allocation in a crab fishing
year at the time of sale. Based on preliminary calculations, NMFS
expects that 3 percent of ex-vessel value would not cover the
management and enforcement costs of the Program. NMFS proposes to begin
the cost recovery program by using the maximum of 3 percent and, if
possible, adjusting the fee downward in the following season. The fee
percentage calculation adjusts for overpayment of the management and
enforcement costs through a variable that considers the balance in the
LASAF account.

Calculating Ex-vessel Value

The ex-vessel value of a crab landing would equal the sum of
all payments of monetary worth made to fishermen for the sale of crab
(e.g., ex-vessel value = cash payment + bait discount from
processor + bonus). This would include any retro-payments (e.g.,
bonuses, delayed partial payments, post-season payments) made to
any crab allocation holder for previously received crab.
Retro-payments would be part of the ex-vessel value and,
as such, carry a fee liability. The fee liability for
retro-payments would be based on the crab fee percentage in
effect at the time the crab was received by the RCR. If crab allocation
holders receive retro-payments after the initial payment, but
during the same crab fishing year, the cost recovery fee for those
retro-payments would be due by the following July 31. If
retro-payments were received by crab allocation holders during
the year following the crab fishing year when those crab were landed,
cost recovery fees associated with those post-season
retro-payments would be due the following July 31. In other
words, no matter when the crab was received by the RCR, the cost
recovery fee would be due by July 31 of the crab fishing year following
the crab fishing year in which payment was received.

Ex-vessel Value

Throughout this section, ``value'' refers to the worth, in U.S.
dollars, of any amount of crab as determined by the sale, or potential
economic return for the sale, of those crab. ``Value'' shall also
include any money, services, or goods-in-kind exchanged
for crab. ``Price'' is the worth in U.S. dollars, for 1 lb (0.45 kg) of
crab debited from any allocation. Therefore, in this context, value and
price mean the same thing only when describing the worth of 1 lb (0.45
kg) of crab when sold. For purposes of determining cost recovery fees,
NMFS would distinguish between two types of ex-vessel values:
``shoreside ex-vessel value'' and ``CP ex-vessel value.''
Shoreside ex-vessel value would be the amount of money an RCR
permit holder paid for any crab he or she received. As explained below,
this proposed rule would establish CP ex-vessel values to
accommodate the special conditions for CPs who conduct processing on
board the vessel.

Shoreside Processor Ex-vessel Value

For the shoreside processing sector, NMFS would define
ex-vessel value as the value paid by the RCR to the allocation
holder at the time of receipt. Shoreside RCR permit holders would
calculate and retain both the harvesting and processing sector's fee
liability portions for any crab debited from an allocation based on the
value paid for that crab. This method of determining ex-vessel
value for the shoreside processing sector requires no prior calculation
of ex-vessel value by NMFS because the shoreside processors
would determine the ex-vessel value at the time they receive the
crab from the allocation holder. Shoreside processors would pay the
actual ex-vessel value, which they would also use to calculate
fee liability.

CP Ex-vessel Value

For the CP sector, NMFS would calculate the ex-vessel value
based on a weighted average of previous years' shoreside
ex-vessel values. This method correlates with an existing method
used to calculate standard prices under the halibut and sablefish IFQ
program. NMFS determined that using the weighted average method for CPs
represents the method best suited for achieving both equity and
accurate accounting for the CP sector. Based on the information
received through the electronic reporting system, NMFS would annually
calculate and publish in the Federal Register a list of CP standard
prices broken down by crab species, month, and port or port group.

[[Page 63242]]

The CP standard prices would remain in effect until changed by the
Regional Administrator through publication in the Federal Register the
following year. The Regional Administrator would revise the CP standard
prices annually based on information regarding current volume and value
provided by RCRs operating as shoreside processors. The CP standard
prices would be calculated by NMFS to reflect as accurately as
practical the seasonal and regional variations in the shoreside
ex-vessel prices of crab.
The information that would be reviewed by the Regional
Administrator to determine CP standard prices would include the
following: (1) Landed pounds by crab species, port or
port-group, and date; (2) Total ex-vessel value by
species, port or port-group, and date; and (3) Price adjustments
based on retro-payments.

Fee Liability

Under this proposed rule, NMFS would identify the crab cost
recovery fee liability as the total fee owed by a crab allocation
holder based on the applicable period's fee percentage and the
ex-vessel value for the crab species, as calculated according to
Sec. 680.44(a)(2)(ii), including any retro-payments, penalties,
or interest. Fee liability would be calculated by multiplying the fee
percentage by the ex-vessel value of the crab. For example, a
crab allocation holder who lands 10 pounds (4.54 kg) of crab at an
ex-vessel price of $1 a pound under a fee percentage of 3
percent is subject to and must pay a fee of $0.03 for that crab.
A fee liability would attach to any crab debited from an allocation
during a crab fishing year. By using the ``debited'' designation rather
than the term ``landed,'' NMFS created a more specific method of
ensuring that RCRs properly apply fee liability to crab. The use of the
term ``landed'' contradicts Council intent to avoid imposing fees on
forfeited or confiscated crab. Although deadloss must be debited from
allocations by statute and thus be subject to crab cost recovery fee
liability, the ex-vessel value of deadloss would most likely be
$0 and would result in no fees.
Fee Liability Calculation. The fee amount would be the product (in
U.S. dollars) of multiplying the appropriate ex-vessel value by
the fee percentage (up to 3 percent). The RCR permit holder would
document the calculations of fees based on applicable ex-vessel
values through the electronic reporting system provided by NMFS. The
following example shows how an RCR permit holder would calculate fee
liabilities.
Example of Ex-vessel Value Determination. A crab allocation
fisherman makes a landing of Bristol Bay red king crab at Dutch Harbor
in February that results in a debit of 1,000 lb (0.35 mt) from his or
her allocation (1,000 raw crab pounds). He or she sells all the crab to
a shoreside processor for $1.00 per pound. If the fee percentage is 3
percent, then a shoreside RCR who receives the crab would deduct $.015
for each pound of crab received from what he or she pays the allocation
holder who landed the crab. The RCR would be responsible for an
additional $.015 for each pound of crab received after payment to the
allocation holder for a total of $.03 on every $1.00 of crab, or 3
percent. On the other hand, a CP would be responsible for the full 3
percent from the same landing of crab. The RCR would determine the
ex-vessel value as follows:

(Raw Crab Pounds Sold x Price per crab lb) x Fee Percentage =
allocation or RCR Permit Holder Fee

CP: (1,000 IFQ lb x $1.00/IFQ lb) x 0.03 = $30.00

Shoreside Processor: (1,000 IFQ lb x $1.00/IFQ lb) x 0.015 = $15.00

Allocation Harvester: (1,000 IFQ lb x $1.00/IFQ lb) x 0.015 = $15.00

Fishing Year

NMFS determined the need for a ``crab fishing year'' to accommodate
biological and administrative requirements of the crab fishery. The
proposed crab fishing year would run from July 1 to June 30 to support
molting and mating requirements for crab, required biological surveys,
the State's calculation of the TAC, and Federal administrative
application and permitting requirements. The proposed rule would
require all RCRs to submit all fee liabilities and any associated
documentation by July 31 of the following crab fishing year.

Payment Submission

Instead of a billing system similar to the halibut and sablefish
IFQ program, this proposed rule would require all RCRs to retain,
document, and submit all fee liabilities for themselves and any crab
allocation holders from which they receive crab. NMFS determined that
this method provides the highest degree of administrative efficiency
with the lowest burden on the affected public. Under this method, NMFS
would establish the fee percentage for the pending year based on a
calculation similar to that used under the halibut and sablefish model.
NMFS would publish the fee percentage calculation in the Federal
Register prior to fishing for the pending crab fishing year. All RCRs
would apply that fee percentage to any crab they receive or process
during the period in which the fee percentage applies.
RCR permit holders must collect all fee liabilities for any crab
received and debited from a crab allocation throughout the fishing year
and submit those fees by July 31 of the following crab fishing year.
Early payments would be allowed but would not relieve an RCR permit
holder from any associated reporting requirements.

Payment Compliance

An RCR permit holder who has incurred a fee liability would be
required to pay the fee to NMFS by July 31 of the year following the
crab fishing year in which the applicable crab was debited from a crab
allocation and payment was made. The issuance of new permits would be
contingent on an RCR's submission of his or her full fee liability as
indicated by his or her own reporting. NMFS would provide due process
under an administrative appeals system similar to that of the halibut
and sablefish IFQ program for any RCRs who choose to challenge any
dispute regarding fee liability based on the RCRs own submitted data.
However, no permit would be issued until his or her full fee liability
is received or there is final agency action resolved in favor of the
RCR. Furthermore, any RCR that fraudulently submits required
information regarding cost recovery fee collection would face an
enforcement action under the prohibitions for this section.
If an RCR permit holder has made a timely payment to NMFS of any
amount less than the fee liability indicated by the RCR permit holder's
own reporting, the RCR permit holder has the burden of demonstrating
the fee amount submitted is correct. If, upon preliminary review of the
accuracy and completeness of a fee payment, NMFS determines the RCR
permit holder has not paid a sufficient amount, NMFS would, at any time
thereafter, send an IAD to the RCR permit holder. The IAD would present
the facts, explain those facts within the context of the relevant
agency policies and regulations, and make a determination as to the
appropriate disposition of the matter. In the IAD, NMFS would explain
that the RCR permit holder's estimated fee liability failed to
correspond with the RCR permit holder's own reporting and would provide
the correct fee liability due as calculated from the RCR permit
holder's own reporting. Upon issuance

[[Page 63243]]

of an IAD, NMFS may withhold issuance of any new IFQ, IPQ, or RCR
permit and disapprove any transfer of IFQ, IPQ, PQS, and/or QS to or
from the RCR permit holder until final agency action is taken. An
aggrieved RCR permit holder could appeal an IAD through the OAA as
described at Sec. 679.43. An IAD that is not appealed to the OAA
within 60 days of issuance in NMFS would become a final agency action.
Upon final agency action, the RCR would remain subject to several
conditions. If the final agency action determines the RCR permit holder
owes additional fees and if the RCR permit holder has not paid such
fees, no new RCR, IFQ, or IPQ permit(s) would be issued to the RCR
permit holder for the current or subsequent crab fishing years until
the required payment is received by NMFS. Additionally, the RCR permit
holder would continue to be restricted from transferring or receiving
by transfer any PQS, QS, IFQ or IPQ. An RCR permit holder could pay,
under protest, the disputed fee difference in order to avoid permit
restrictions. If NMFS does not receive the required payment within 30
days of the issuance of the final agency action, NMFS would refer the
matter to the appropriate authorities within the U.S. Treasury for
purposes of collection.

Limited Access System Administrative Fund (LASAF)

Most of the fees collected would be deposited in the LASAF
established in the U.S. Treasury. Up to 25 percent could be deposited
separately in the U.S. Treasury and made available to cover the costs
of the loan program, as required by sections 304(d)(2)(C) and 313(j) of
the Magnuson-Stevens Act. Separate accounts would be created
within the LASAF to ensure that NMFS would use funds from the Program's
cost recovery only to pay for the costs directly related to the
management and enforcement of the Program, and not other limited access
programs.

Community Development Quota Fee Provisions

Section 304(d)(2)(A) of the Magnuson-Stevens Act requires
the Secretary to collect a fee to recover the actual costs directly
related to the management and enforcement of any community development
quota program. Community development quota programs under the Program
include those CDQ allocations established under section 305(i).
Additionally, Magnuson-Stevens Act section 313(j) requires the
Secretary to collect a fee to recover the actual costs directly related
to the management and enforcement of the Adak community allocation.
NMFS and ADF&G believe there would be increased management and
enforcement costs associated with the CDQ and Adak community
allocations under the Program. Therefore, all fee liability provisions
would apply equally to any allocation of crab regardless of its
designation under the Program.
Section 305(i)(3), requires the Secretary to deduct the costs
incurred by participants in a community development quota program for
observer and reporting requirements that are in addition to observer
and reporting requirements of other participants in the fishery from
any fees collected under section 304(d)(2). ADF&G confirmed its
intention to manage the Adak community allocation similar to a CDQ
allocation under its management authority. ADF&G also stated it does
not intend to impose any observer and reporting requirements for the
community allocations beyond those required for any other allocation
under the Program. Therefore, no deductible costs would exist for any
community development quota program under this Program. This allows for
a uniform and administratively simple fee calculation and payment
system for the entire cost recovery program.

Annual Report

NMFS would publish an annual report on the performance of the cost
recovery program. The annual report, which could be included with other
reports on the performance of the Program, would provide information
regarding the amount of the fees received by NMFS, the disposition of
the fees, the status of the Program's account in the LASAF, and the
Program costs for the previous year.

Section 679.5 Recordkeeping and Reporting (R&R)

In Sec. 679.5, paragraph (a)(7)(i) would be revised by adding a
new paragraph (a)(7)(i)(B) to describe the added fishing activities of
shoreside processors and stationary floating processors (SFPs) of
``purchase or arrange to purchase'' and by redesignating (a)(7)(i)(B)
through (E) as (a)(7)(i)(C) through (i)(F), respectively. Newly
redesignated paragraph (a)(7)(i)(C) would be revised by removing
reference to shoreside processors and SFPs.
The longline and pot gear daily fishing logbook (DFL) and longline
and pot gear daily cumulative production logbook (DCPL) would be
revised for use by the operator on crab catcher vessels of all lengths
and on all crab CPs. In Sec. 679.5, paragraph (C)(1) would be revised
to include crab numbers, crab weight in pounds, and Federal crab vessel
permit number.
In Sec. 679.5, regulations for the product transfer report (PTR),
as well as the PTR form, would be revised so the PTR could also be used
to document shipments of crab managed under 50 CFR part 680. Paragraph
(g)(1) would be revised by splitting the paragraph into three
subparagraphs. Paragraph (g)(1)(i) would describe PTR requirements when
documenting shipments of groundfish. The operator of a mothership or CP
or the manager of a shoreside processor or SFP is responsible for the
PTR. Paragraph (g)(1)(ii) would describe PTR requirements when
documenting shipments of IFQ halibut, IFQ sablefish, and CDQ halibut.
The Registered Buyer is responsible for the PTR. Paragraph (g)(1)(iii)
would describe new PTR requirements when documenting shipments of crab.
The RCR would be responsible for the PTR.
The requirements for the receiver of fish to submit a PTR would be
removed from Sec. 679.5(g). The NOAA Fisheries Office for Law
Enforcement (OLE) has determined that it is no longer necessary for a
receiver to submit a PTR. Therefore, only shipments of fish would be
documented on a PTR.
In Sec. 679.5, a new heading, ``Exceptions'' would be added as new
paragraph (g)(2). Paragraphs (g)(1)(i) through (iii) and (g)(1)(v) and
(vi) would be redesignated as (g)(2)(i) through (v), respectively.
Paragraph (g)(1)(iv) would be removed because the requirement for
receivers to submit a PTR is removed. Newly redesignated paragraph
(g)(2)(i) ``Bait sales (non-IFQ groundfish only)'' would be
revised to clarify the requirement. Newly redesignated paragraph
(g)(2)(ii) ``Retail sales'' would be revised to create paragraphs
(g)(ii)(A) and (ii)(B). Paragraph (g)(ii)(A) would address existing
requirements for retail sales of IFQ halibut, IFQ sablefish, CDQ
halibut, and non-IFQ groundfish. Paragraph (g)(ii)(B) would add
new requirements for retail sales of crab. Newly redesignated paragraph
(g)(iv)(A) ``Dockside sales'' would be revised by removing ``IFQ fish''
and adding in its place ``IFQ halibut and IFQ sablefish.'' Newly
redesignated paragraph (g)(v) ``Transfer directly from the landing site
to a processing facility ...'' would be revised to include shipment of
crab. Paragraph (g)(v)(A) would address the current IFQ landing report
receipt requirements for CDQ halibut, IFQ halibut, and IFQ sablefish.
Paragraph (g)(v)(B) would describe new requirements for crab landing
report receipt. Paragraphs (g)(v)(A) and

[[Page 63244]]

(g)(v)(B) would further be revised by removing ``(Internet or
transaction terminal receipt)'' and by adding in its place ``(Internet
receipt).'' Paragraphs (g)(v)(C) and (g)(v)(D) would be revised to
include the crab landing report receipt.
Newly redesignated paragraph (g)(3) would be revised to include
requirements for an RCR. Paragraph (g)(3)(iii) would be revised to
remove ``ensure ... a revised PTR is submitted'' and would be replaced
by ``submit a revised PTR.''
The heading of newly redesignated paragraph (g)(4) would be revised
by removing ``general information'' and by adding in its place
``required information.'' Paragraph (g)(4) would be revised to include
requirements for an RCR. Paragraph (g)(4)(i) would be revised. The OLE
has determined that a confirmation number documenting receipt of a PTR
by NMFS would be beneficial to record tracking. The fishermen would
submit the PTR to OLE, who would return by e-mail the
confirmation number for each PTR submitted.
The vessel activity report (VAR) would be revised for use by the
operator on crab vessels required to obtain a Federal Crab Fishing
Vessel permit. Section 679.5(k) would be revised to require a catcher
vessel of any length that is required to obtain a Federal Crab Fishing
Vessel permit that has fish, fish products, shellfish, or shellfish
products to submit a VAR prior to crossing the seaward boundary of the
EEZ off Alaska or the U.S.-Canadian international boundary
between Alaska and British Columbia.
Use of the ATM terminals for submitting IFQ landing reports for IFQ
halibut, IFQ sablefish, and CDQ halibut would be removed, because ATM
terminals and associated printers have become obsolete, in fact have
not been manufactured since 2001. It is no longer possible to obtain
new units or parts for existing terminals or ribbons for the printers.
Internet and ATMs are completely different technologies, that
require entirely separate software to run them. NMFS Alaska Region can
no longer afford staff resources to maintain two electronic reporting
systems for IFQ halibut, CDQ halibut, and IFQ sablefish.
Internet is easier and more convenient for constituents to use and
less prone to result in incorrect account. Users would have a larger
screen with which to review all data at the same time and make
corrections before submitting as compared with the small LED display
for ATMs. Another advantage of the Internet is the fact that users
won't have to upgrade every time software changes. Internet use costs
are relatively low. There would be no NMFS telephone charges or
equipment maintenance. Because IFQ fees are charged for NMFS program
costs, user fees may well be lower when ATMs are no longer used.
All of NMFS Alaska Region reporting within the next 1-2 years is
planned to be via an Internet- based interagency electronic ``fish
ticket'' or ``shared reporting system'' with the State of Alaska and
International Pacific Halibut Commission. The ATMs are obsolete when
compared with this envisioned new system.
NMFS Alaska Region introduced use of an Internet alternative for
IFQ landing reports in June 2002. In 2004, 97 percent of reports were
submitted electronically, and of all reports, 84 percent were made
using the Internet system. In 2004 to date, all but 12 of the locations
from which landings were filed have used the Internet at least once,
indicating that almost everyone has the capability to use the Internet.
However, since 1995, NMFS Alaska Region has offered a limited-use
manual backup system for those persons who are unable to report
electronically.
In Sec. 679.5, text referring to the ATM terminal would be removed
from paragraphs (l)(2)(iii)(M), (l)(2)(iv), (l)(2)(iv)(A),
(l)(2)(iv)(C), and (l)(2)(iv)(D). In addition, the Federal Fisheries
Permit application would be revised to remove references to the ATM
terminal.
In Sec. 679.5(l), two of the existing IFQ forms would be revised
for use by the operator on crab vessels of any length required to
obtain a Federal Crab Fishing Vessel permit: Paragraph (l)(3) would be
revised to require a transshipment authorization from an OLE clearance
officer prior to crab or crab products being transferred between
vessels.
In Sec. 679.5, paragraph (l)(4) would be revised to require the
RCR to submit a Departure Report prior to departing the waters of the
EEZ adjacent to the jurisdictional waters of the State of Alaska, the
territorial sea of the State of Alaska, or the internal waters of the
State of Alaska when crab are on board.
In Sec. 679.28, paragraph (f)(4)(i) would be changed by adding the
requirements to enter the Federal crab vessel permit number to the VMS
check-in report and by removing outdated text ``and
approximately when and where the vessel began fishing.'' Removal of
this outdated text would align the regulations at Sec. 679.28 with
NMFS' current VMS policy.
A new Table 13 to part 679--Transfer Form Summary--would be added.
This table previously occurred in the regulatory text at Sec.
679.5(a)(15) as an intext table. Table 13 would be revised to include
paperwork requirements for crab transfers. In Section 679, paragraph
(a)(15) would be revised to reference Table 13.
Table 14a to part 679--Port of Landing Codes, Alaska--and Table 14b
to part 679--Port of Landing Codes, Non-Alaska--would be
indicated for use by crab participants completing paperwork
requirements. Table 14b would be revised by moving the port of Olympia
from the state of Oregon and placing it under the state of Washington.
Table 14c At-sea Operation Type Codes would be added for use by
crab participants.
Table 15 to part 679--Gear Codes, Descriptions, and Use--would be
indicated for use by crab participants completing paperwork
requirements. Table 15 would be revised by adding a column for crab and
indicating pot gear.
Part 680 would have nine tables to support the regulatory text.
Table 1 to Part 680--Crab Rationalized (CR) Fisheries--presents the
crab species that are included in the Crab Rationalization Program and
areas where each crab species occurs. The coordinates for each area are
given in latitude and longitude. A 3-digit alphabetic code is
given for each combination of crab species and area.
Table 2 to Part 680--Crab Species Codes--presents 3-digit
numeric species codes for the crab species that occur in the EEZ off
the coast of Alaska. Both common names and Latin names are provided.
Table 3a to Part 680--Crab Delivery Condition Codes--presents codes
to represent the condition of the shellfish at the point it is weighed
and recorded on an ADF&G fish ticket.
Table 3b to Part 680--Crab Disposition or Product Codes--presents
codes to represent the product that was made from the crab or whether
the crab was used for personal use.
Table 4 to Part 680--Crab Process Codes--presents codes to
represent the process used to create the crab product.
Table 5 to Part 680--Crab Size--presents codes to represent the
size of crab product.
Table 6 to Part 680--Crab Grade--presents codes to represent
quality of crab product.
Table 7 to Part 680--Eligibility for Initial Issuance of Crab QS by
Crab QS Fishery--presents the qualifying years for CVO and CPO QS, the
qualifying years for CVC and CPC QS, recent participation seasons for
CVC and CPC QS, and subsets of qualifying years that

[[Page 63245]]

can be used to calculate QS for each QS fishery.
Table 8 to Part 680--Initial QS and PQS Pool for each Crab QS
Fishery--presents the initial QS pool for the eight crab QS fisheries.
Table 9 to Part 680--Eligibility for Initial Issuance of Crab PQS
by Crab QS Fishery--presents for each crab QS fishery, the qualifying
periods used to determine the allocation of PQS.

Classification

The Magnuson-Stevens Act mandates that NMFS approve
Amendment 18 to the FMP by January 1, 2005. At this time, NMFS has not
determined that Amendment 19 and the provisions in this rule that would
implement Amendments 18 and 19 are consistent with the national
standards of the Magnuson-Stevens Act and other applicable laws.
NMFS, in making the determination that this proposed rule is
consistent, will take into account the data, views, and comments
received during the comment period (see DATES).
A Regulatory Impact Review (RIR) was prepared to assess all costs
and benefits of available regulatory alternatives. The RIR considers
all quantitative and qualitative measures. The Program was chosen based
on those measures that maximize net benefits to affected participants
in the BSAI crab fisheries. Additionally, a draft initial regulatory
flexibility analysis (IRFA) was prepared that describes the impact this
proposed rule would have on small entities. Copies of the RIR/draft
IRFA prepared for this proposed rule are available from NMFS (see
ADDRESSES).
The complete IRFA includes the draft IRFA and this preamble
document. The IRFA describes in detail the reasons why this action is
being proposed, describes the objectives and legal basis for the
proposed rule, and discusses both small and non-small regulated
entities to adequately characterize the fishery participants. Section
313(j) of the Magnuson-Stevens Act provides the legal basis for
the proposed rule, namely to achieve the objective of reducing
excessive fishing capacity and ending the race for fish under the
current management strategy for commercial fishing vessels operating in
the BSAI crab fisheries. By ending the race for fish, NMFS expects the
proposed action to increase resource conservation, improve economic
efficiency, and address social concerns.
The IRFA contains a description and estimate of the number of small
entities to which the proposed rule would apply. Approximately 236
entities own crab harvest vessels that are directly regulated under the
alternatives considered. Of those entities, 223 are small entities
because they either generated 3.5 million or less in gross revenue,
based on participation in 1998, 1999, or 2000, or they are independent
entities not affiliated with a processor that would increase the
entities average revenue above the small business size standards.
Thirteen of the entities (owning 38 vessels) are considered
non-small entities. NMFS requests public comment on which small
business size standard is appropriate for catcher processors: the
catcher vessel size standard or the processor size standard (see
ADDRESSES).
A total of 134 entities made at least one crab landing from 1991 to
2000, but do not appear to qualify for an initial allocation of QS.
Five of these entities are not small entities and 129 qualify as
``small'' by SBA standards. The non-small entities owned a total
of nine catcher vessels. The small entities owned a total of 155
catcher vessels and one CP. By and large, vessels that do not qualify
for the Program either left the fishery or currently fish under interim
LLP licenses. Moreover, the vessels the IRFA considers
``non-qualified'' could not or would not be allowed to continue
fishing under the current LLP. The impacts to the small entities that
would be prohibited from fishing by the LLP were analyzed in the RIR/
IRFA and FRFA prepared for the LLP. Therefore, the non-qualified
vessels are not considered impacted by the proposed rule and are not
discussed in this IRFA.
Eight small entities and nine non-small entities appear to
qualify for processor allocations based on participation during 1998
and 1999. These totals exclude CPs, which are included in the vessel
discussion. The nine inshore processors are considered non-small
entities because they appear to exceed the ``500 or more employees''
threshold when all their affiliates, worldwide, are included. The nine
large processing entities owned 28 separate crab processing facilities,
and the eight small processing entities owned 10 plants.
Forty-three small processing entities (owning 50 plants) appear
not to qualify for initial PQS allocations.
Thirteen communities could be directly impacted by the
regionalization provisions under consideration. The overall impact on
communities cannot be determined until NMFS makes all of the
allocations of processing shares. At a minimum, St. Paul, St. George,
Adak, Akutan, Dutch Harbor, King Cove, False Pass, Ninilchik, Homer,
Port Moller, Cordova, and Kodiak possess recorded landings in the crab
fisheries under any of the alternatives. The communities where these
processors are located would all be considered small government
jurisdictions. Each of the communities have populations well under the
50,000 limit for consideration as a small entity.
Other supporting businesses may also be indirectly affected by this
action if it leads to fewer vessels participating in the fishery. These
impacts are treated in the RIR prepared for this action (see
ADDRESSES).
The Council considered an extensive and elaborate series of
alternatives, options, and suboptions as it designed and evaluated the
potential for rationalization of the BSAI crab fisheries, including the
``no action'' alternative. The RIR presents the complete set of
alternatives, in various combinations with the complex suite of
options. The EIS presents four alternative programs for management of
the BSAI crab fisheries, namely, Status Quo/No Action (Alternative 1);
the Crab Rationalization Program (Alternative 2); an Individual
Fisherman's Quota (IFQ) Program (Alternative 3); and a Cooperative
Program (Alternative 4). These alternatives constitute the suite of
``significant alternatives'', under the proposed action, for RFA
purposes. Each is addressed briefly below. Please refer to the EIS and
its appendices for more detail (see ADDRESSES). The following is a
summary of the contents of those more extensive analyses, specifically
focusing on the aspects which pertain to small entities.
Under the status quo, the BSAI crab fisheries have followed the
well known pattern associated with managed open access. Enticed by the
prospect of capturing 100 percent of the benefits, while externalizing
all but a very small ``common'' share of the cost of an individual
fishing decision (i.e., no enforceable ownership rights to ration
access) these BSAI crab fisheries have been characterized by
``race-for-fish'', capital stuffing behavior, excessive
risk taking, and a dissipation of potential rents. In the face of
substantial stock declines, participants in these fisheries are
confronted by significant surplus capacity (in both the harvesting and
processing sectors), financial distress (for some, failure), and
widespread economic instability, all contributing to resource
conservation and management difficulties.
In response to worsening biological, economic, social, and
structural conditions in many of the BSAI crab fisheries, the Council
found that the status quo management structure was causing significant
adverse impacts to the participants in these fisheries, as well as the
communities that depend on these fisheries. As indicated in the

[[Page 63246]]

IRFA, many small entities, as defined under RFA, are negatively
impacted under current managed open access rules. The management tools
in the existing FMP (e.g., time/area restriction, LLP, pot limits) do
not provide managers with the ability to effectively solve these
problems, thereby making Magnuson-Stevens Act goals difficult to
achieve and forcing reevaluation of the existing FMP.
In an effort to alleviate the problems caused by excess capacity
and the race for fish, the Council determined that the institution of
some form of rationalization program is needed to improve crab
fisheries management in accordance with the Magnuson-Stevens
Act.
The IFQ alternative would, as the name implies, allocate individual
shares of the crab TAC to harvesters, imparting a
``quasi-private property interest'' (i.e. a transferrable access
privilege) in a share of the TAC, thus removing the undesirable
``common property'' attributes of the status quo on qualifying
harvesters. The rationalization of the BSAI crab fisheries would likely
benefit the approximately 223 businesses that own harvest vessels and
are considered small entities. In recent years these entities have
competed in the race to fish against larger businesses. The IFQ
alternative would allow these operators to slow their rate of fishing
and give more attention to efficiency. Some of these operations and the
vessels they use could be negatively impacted if the allocations they
qualify for are small and cannot be fished economically. The
participants, however, would be permitted to lease or sell their
allocations, and could obtain some return from their allocations.
Differences in efficiency implications of rationalization by business
size cannot be predicted. Some participants believe that smaller
vessels could be more efficient than larger vessels in a rationalized
fishery because a vessel only needs to be large enough to harvest the
IFQ. Conversely, under open access, a vessel has to be large enough to
out compete the other fishermen and, hence, the overcapacity problems
under the race for fish. If that is true, it is possible that some of
the smaller participants in the fishery could increase their activity
(by purchasing or leasing QS/IFQ) in a rationalized fishery.
However, the IFQ alternative would fail to protect the economic and
social interests of other participants, also dependent on these crab
fisheries, namely, processor and community entities. As the analysis in
the RIR demonstrates, while harvesters clearly benefit, the IFQ
alternative likely would increase the negative economic impacts
relative to status quo on processor and community small entities.
Specifically, as discussed in the RIR and SIA, harvesters may deliver
crab to new processors in locations with more access to the outside
world, forcing the closing of processing facilities in remote areas,
such as Saint Paul, Saint George, and Unalaska/Dutch Harbor.
The Cooperative alternative yields many of the positive economic,
social, and structural results cited above for the IFQ alternative. In
addition, however, the Cooperative alternative holds out the promise of
providing efficiency gains to both small entity harvesters and the
processors. Data on cost and operating structure within each sector are
unavailable, so a quantitative evaluation of the size and distribution
of these gains, accruing to each sector under this management regime,
cannot be provided. Nonetheless, it appears that the Cooperative
alternative offers all of the same ``improvements'' over the status quo
as does the IFQ alternative (e.g, institution of
``rights-based-management'' structure, reduction in
uncertainty) while including another of the populations of participants
the Council expressed explicit concern about protecting, in its problem
statement and objectives for this action (i.e., crab processors).
While, on the basis of available information, the Cooperative
alternative appears to minimize negative economic impacts on small
entities to a greater extent than does an IFQ alternative, and both
appear to minimize negative economic impacts compared to the Status
Quo, it is apparent, on the basis of the EIS and RIR analyses, that the
Cooperative alternative does not extend the benefits of rationalization
to the third population of small entities, fishery dependent
communities.
After an exhaustive public process, spanning several years, the
Council concluded that the Program best accomplishes the stated
objectives articulated in the problem statement and applicable
statutes, and minimizes to the extent practicable adverse economic
impacts on the universe of directly regulated small entities. This
proposed rule would implement the Program.
The Program makes three separate allocations; one to the harvest
sector, one to the processing sector, and one to defined regions. All
three allocations are based on historic participation to protect
investment in and reliance on the fisheries. Harvesters would receive
harvest allocations, processors would receive processing allocations,
and regions would receive allocations of landings and processing
activity. These three separate allocations are also intended to
mitigate the negative effects of the transition from a regulated open
access race-for-fish to rationalized fisheries, burdens
which tend to fall most heavily on small entities.
The competing interests of harvesters and processors, many of which
are small entities, are balanced by allocating different portions of
the total harvest to the two sectors. Harvesters would be allocated
harvest shares for 100 percent of the TAC, minus the community
allocations. Processors would be allocated processing shares for 90
percent of the TAC. To ensure corresponding allocations to the two
sectors, 90 percent of the harvest allocation is allocated as Class A
IFQ that require delivery to a processor that holds IPQ. The remaining
10 percent would be Class B IFQ shares that can be delivered to any
processor. Under the Program, harvesters (many of whom, as noted, are
small entities) would be permitted to form cooperatives to achieve
efficiencies and reduce transaction costs through the coordination of
harvest activities and deliveries to processors.
Small harvester entities that receive allocations large enough to
support their participation could benefit from not needing to
participate in the race for fish, as with the IFQ alternative. The
portion of the fishery allocated as Class B IFQ, also known as open
delivery IFQ, would also impact the effects of the Program on small
harvesters, since Class B IFQ are likely to provide harvesters with
additional power in their delivery negotiations with processors.
Small processors appear to have been exiting the crab fishery in
recent years as the harvest levels have declined and seasons have been
compressed. The proposed rule would allocate PQS to processors that
participated in the fishery in either 1998 or 1999. ``Small''
processors that plan to enter or reenter the crab fisheries (but did
not participate during the qualifying years) would be allowed to
process crab harvested with Class B IFQ and CDQ crab. Class B IFQ and
CDQ crab would provide a mechanism for small processors to enter the
fishery without large capital outlays to purchase PQS or IPQ. Class B
IFQ, however, would reduce the allocation of PQS to the small and large
processors that qualify for the Program. Class B IFQ therefore may
negatively impact small processors, if they are unable to compete with
large processors in the market place for the Class B IFQ.

[[Page 63247]]

To resolve impasses in price negotiations, a potentially crippling
occurrence for the smaller operators, the Program would include a
mandatory binding arbitration program for the settlement of price
disputes between harvesters and processors. Historically, prices have
been settled by protracted, often contentious negotiations, from time
to time resulting in harvesters delaying fishing (i.e., strikes), which
can be detrimental to all concerned. An effective system of binding
arbitration could protect the interests of both sectors in
negotiations, while avoiding costly delays in fishing due to strikes.
A number of small governmental jurisdictions would be directly
regulated by, and therefore could be impacted by, this proposed rule.
All communities benefitting from these special provisions of the
proposed rule are ``small'', under SBA criteria. Community interests
have been explicitly considered in the Program, and special provisions
have been included to minimize (to the extent practicable) adverse
impacts on these small entities. Under these provisions the degree of
protection would likely vary community-to-community.
The allocation to regions is accomplished by regionally designating
all Class A IFQ (delivery restricted) and all corresponding IPQ. In
most fisheries, regionalized IFQ and IPQ are either North or South,
with North IFQ designated for delivery in areas on the Bering Sea north
of 56[deg]20' north latitude and South IFQ designated for any other
areas, including Kodiak and other areas on the Gulf of Alaska. IFQ and
IPQ designations are based on the historic location of the landings and
processing that gave rise to the shares. The proposed rule would also
increase the allocation of crab to CDQ groups from 7.5 percent to 10
percent, providing additional aid to the 65 CDQ communities (all small
entities).
Community processing requirements in the first two years of the
Program and ROFR would benefit communities with history supporting
initial allocations and are intended to protect community interests.
The ROFR provisions are likely to benefit communities that are more
capable of exercising the right. Under the more general regional
protection, processing activity could move between communities in a
region. This is likely to benefit those communities able to attract
additional processing activity from other communities in the region and
harm communities that processing activity leaves. IPQ caps would
benefit communities able to attract processing in years of high total
harvest. Additionally, CDQ groups would be able to purchase QS and PQS
to increase their participation in the BSAI crab fisheries above the
CDQ allocation.
The proposed rule also contains several additional measures to
protect various interests. Eligible crew would receive 3 percent of the
initial allocation of QS. Sideboards would limit the activity of crab
vessels in other fisheries (such as the GOA groundfish fisheries) to
protect participants in those fisheries from a possible influx of
activity that could arise from vessels that exit the crab fisheries, or
are able to time activities to increase participation in other
fisheries. While these benefactors of this provision are not directly
regulated, and therefore not counted among the entities addressed in
this IRFA, they are predominantly small entities.
Fish taxes would likely be redistributed with any redistribution of
processing activity. In addition, the provision of support services and
associated sales taxes would likely be redistributed to some extent by
redistribution of landings in a rationalized fishery. Increased
efficiency in the fisheries arising from the Program could reduce the
demand for support services, impacting sales tax revenues, if the fleet
is able to reduce their overall costs. These impacts may occur in large
and small communities. Since the redistribution of activity and the
increased efficiency cannot be predicted these effects cannot be fully
characterized. Additional analysis of community impacts is contained in
the Social Impact Analysis, EIS Appendix 3 (see ADDRESSES).
Implementation of the proposed rule would change the overall
reporting structure and recordkeeping requirements of the participants
in the BSAI crab fisheries. Under the statutorily mandated proposed
rule, all participants would be required to provide additional
reporting. Each harvester would be required to track harvests to avoid
exceeding his or her allocation. As in other North Pacific rationalized
fisheries, processors would provide catch recording data to managers to
monitor harvest of allocations. Processors would be required to record
deliveries and processing activities to aid in the Program
administration.
NMFS would be required to develop new databases to monitor
harvesting and processing allocations. These changes could require the
development of new reporting systems. The costs of NMFS' monitoring of
the fisheries would be passed to participants through the cost recovery
program.
To participate in the Program, persons would be required to
complete application forms, transfer forms, EDR forms, reporting
requirements, and other collections-of-information. These
the forms are either required by the Magnuson-Stevens Act or
required for the administration of the Program. These forms impose
costs on small entities in gathering the required information and
completing the forms.
We have estimated the costs of complying with the reporting
requirements based on the burden hours per response, number of
responses per year, and a standard estimate of $25 per burden hour
(except the estimate for the EDR forms is $100 per burden hour).
Persons would be required to complete most of the forms at the start of
the Program, like applications for initial issuance of QS/PQS and the
historic EDR. Persons would be required to complete some forms every
year, like applications for IFQ/IPQ and annual EDRs. Participation in
the binding arbitration program would be also be annual. Additionally,
reporting would be completed more frequently.
The proposed rule also includes a comprehensive data collection
program, which would require participants to submit detailed economic
data concerning their participation in these fisheries. The data
collection program is intended to provide managers with better
information concerning the fisheries to aid in management and to limit
negative unintended consequences arising from management decisions.
Under the required data collection program, NMFS minimized the cost and
time burden associated with the data collection components by breaking
down the program into specific forms directed at specific segments of
the fishery. Although most participants collect data similar to that
which would be collected by the data collection program for making
business decisions, the data collection program could impose additional
recordkeeping requirements on participants in the fisheries. The
detailed level of data required would likely require some additional
data compilation and reporting beyond the status quo. Professional
assistance, such as accounting services, are likely to be necessary for
most participants to comply with these requirements. NMFS estimates
that it would cost small entities that hold CVO QS and PQS
approximately $1,503 to complete the historic EDR and an additional
$1,503 to complete the annual EDR every year. It would cost small
entities that hold CPO QS $2,503 to complete each EDR

[[Page 63248]]

because they would report both harvesting and processing information.
It would cost participants in the Program $56 to complete
applications to receive an initial allocation of QS and PQS, $55 for
the annual application for IFQ and PQS, $61 to complete the
one-time application to be eligible to receive transfers, and
$61 to complete a transfer application. Additionally, it would cost
processors who intend to process crab $16 to complete an RCR permit
application. It would cost an ECCO $64 to complete the Application to
Become an ECCO and $54 to complete the Application to Transfer Crab QS/
IFQ to or from the ECCO. Additionally, it would cost an ECCO $206 to
complete the required annual report.
Congress directed the implementation of much of the proposed
Program through statute. To the extent that the statute allowed
flexibility, NMFS considered multiple alternatives to effectively
implement specific provisions within the proposed Program through
regulation. In each instance, NMFS attempted to impose the least burden
on the public, including the small entities subject to the Program.
The CR crab landing report (internet version and optional fax
version) would be used to debit crab landings. All retained crab catch
must be weighed, reported, and debited from the appropriate IFQ account
under which the catch was harvested and IPQ account under which the
catch was processed. Under recordkeeping and reporting, NMFS considered
the options of a paper based reporting system or an electronic
reporting system. NMFS chose to implement an electronic reporting
system as a more convenient, accurate, and timely method of reporting.
Additionally, the proposed electronic reporting system would provide
continuous access to IFQ and IPQ accounts. These provisions would make
recordkeeping and reporting requirements less burdensome on
participants by allowing participants to more efficiently monitor their
accounts and fishing activities. NMFS recognizes that participants in
the current fishery might be more comfortable with the paper based fish
ticket system, but believes that the added benefits of the electronic
reporting system outweigh any benefits of the paper based system.
However, NMFS would also provide an optional lower tech backup using
existing telecommunication and paper based methods, which would reduce
the burden on small entities in more remote areas possessing less
electronic infrastructure.
As an IFQ system, the Magnuson-Stevens Act requires NMFS to
collect cost recovery fees associated with the monitoring and
enforcement of the proposed Program. The fees would be charged to
harvesters and processors based on the amount of IFQ and IPQ used by
each IFQ and IPQ holder. The initial amount of the fee would be 3
percent of the ex-vessel value of each fishery. We can not
calculate the actual amount of the fee for each fishery in each year
because we can not predict the future TACs or future ex-vessel
values. NMFS considered options that included: (1) collection and
payment individually by harvesters and processors under a billing
system, and (2) collection of fees from the harvester by the processor
and self-collection of processor fees under an annual fee
submission process. NMFS determined that the collection of all fees
from the harvesting and processing sector by the receiving processor
for submission to NMFS on an annual basis would impose the least
administrative burden on the affected public. The collection of fees by
the receiving processor corresponds with the existing requirement for
many processors to collect excise taxes from delivering harvesters in
other fisheries. Additionally, rather than use the calendar year for
administrative purposes, NMFS negotiated an administrative year for the
program that accommodates fee collection by imposing the most
significant administrative burden on the affected participants during
the time of year when the crab fisheries are closed.
Under this proposed rule, CPs would be required to purchase and
install motion-compensated scales to weigh all crab
at-sea. Such scales would cost on a one-time basis,
approximately $25,000 per vessel. Additional costs on a one-time
basis associated with the installation of the scales are estimated to
be between $10,000 and $40,000, depending on the extent to which the
vessel must be reconfigured to install the scale. Scale monitoring
requirements would cost approximately $6,235 per year. Based on
discussions with equipment vendors, NMFS estimates that 8 CPs, one of
which is a small entity, would choose to fish CPO or CPC IFQ.
NMFS considered, but rejected, the use of product weight and
recovery rates (PRRs) in favor of the use of at-sea scales for
catch accounting on CPs. NMFS rejected the use of PRRs for several
reasons. First, the technology for weighing catch at-sea is well
developed, and NMFS believes that the catch weights generated from
these scales produce the best available data for catch accounting
purposes. Second, recovery rates are not well known for many stocks,
and, because recovery could vary with season, the rates may change when
fishing occurs over a larger portion of the year. Third, glaze
percentages on CPs product vary widely. If NMFS chose to use PRRs, NMFS
must either apply vessel specific rates that incorporate glaze
percentages or develop a standard glaze percentage that would either
unfairly penalize the boats with high amounts of glaze or underestimate
the amount of harvest on boats with low glaze percentages. Finally, CPs
conduct different cooking, precooking, prefreeze brining and freezing
processes. These procedural differences create significant uncertainty
in calculating and verifying recovery. NMFS acknowledges that PRRs
would be less costly to the affected public, particularly the small
entities, but determined that the added management benefits of scales
outweigh their costs. To the extent that additional PRR data become
available to NMFS for analysis, future rules may allow PRR based catch
accounting. CPs not wishing to incur the costs associated with scale
installation prior to that time have the option of either joining a
cooperative or leasing their quota.
NMFS considered, but rejected, requirements for increased observer
coverage for the CP fleet. Under existing State regulations, CPs are
required to pay for and carry one observer when engaged in crab fishing
operations. In similar NMFS managed quota fisheries, NMFS requires that
all fishing activity be observed. In most cases, this means that a
vessel must carry two observers. NMFS rejected this approach in the
crab fisheries for two reasons. First, the Council motion specifically
delegated observer coverage responsibility to the State of Alaska.
Second, NMFS felt that the monitoring approach developed for the
fishery (total catch weighing plus a requirement for a total offload
weight) provided for more effective monitoring at a lower cost. NMFS
estimates that a requirement for increased observer coverage would have
cost CPs approximately $400/day plus the additional costs associated
with reconfiguring vessels to ensure that adequate space was available
for the additional observer.
For monitoring of processing activity, it would cost
shore-based processors approximately $416 to complete the catch
monitoring plan and an additional $2,800 annually to complete all
landing reports.
NMFS determined that a VMS program is essential to the proper
enforcement of the Program. Therefore, all vessels participating in the
Program

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