110. Other requirements and authority.

[MSFCMA section 305]


a. Gear evaluation and notification of entry.

Summary:

By April 11, 1998, NMFS must publish a final list of all fisheries under the Councils' or the Secretary's authority, and all fishing gear used in such fisheries. A proposed list must first be published for public comment. The final list may be revised, after notice and comment. Along with the list, we are to publish guidelines for determining whether a fishery or fishing gear is different enough from what's on the list to require notification under paragraph (3). Effective 180 days from publication of the final list, paragraph (3) requires anyone who wants to engage in an unlisted fishery or to use unlisted gear not to do so, without giving 90 days' advance notice to the appropriate Council or to the Secretary for Atlantic HMS fisheries. Emergency rules are authorized to keep people from engaging in unlisted fisheries or using unlisted gear, if it would "compromise the effectiveness of conservation and management efforts under this Act."

Legislative history:

This provision began life in H.R. 39 as a discretionary FMP provision, where a Council could specify allowable gear types and have a process for evaluating new gear. The Senate report says the purpose is to keep new and potentially damaging gear or fisheries from being used or conducted without the Councils' or Secretary's knowledge. It is not intended to require notice "for reasonable gear or fishery modifications made by fishermen routinely to improve operations or adjust to conditions in the fishery."

Issues:

One issue is whether the fisheries to be listed are those under active Federal management, or all fisheries within the geographic areas covered by the Act. There is a reference to information submitted about the fisheries in FMPs, which suggests the smaller list. If we published an FMP-only list, though, six months later every fisherman in other EEZ fisheries would have to send in "advance notice" (and suspend fishing for 90 days?). This is probably not a result intended by Congress. So, difficult though the task may be, it is to identify all fisheries within the geographic authority of each Council, or within the geographic authority of the Secretary for highly migratory species, and all fishing gear used in such fisheries.

a. Fish habitat.

Summary:

This section details the new habitat requirements for the Councils, the Secretary, and other Federal agencies. There are two major parts, first the description and identification of essential fish habitat (EFH), including adverse impacts and conservation and enhancement measures. The second is the consultation requirement for Federal agencies. By April 11, 1997, the Secretary must establish, by regulation, guidelines for the Councils to assist them in describing and identifying EFH, including adverse impacts caused by fishing and other activities, and in considering measures to conserve and enhance EFH. The Secretary must develop a schedule for amending FMPs to include EFH, and for reviewing EFH identification based on new information. The Secretary, in consultation with participants in the fishery, must provide each Council with information and recommendations to help in the identification of EFH, adverse impacts, and conservation and enhancement measures. The Secretary must review the Department's programs to ensure that any relevant programs further the conservation and enhancement of EFH. The Secretary must work with other Federal agencies to further the conservation and enhancement of EFH. Each Federal agency is required to consult with the Secretary regarding any activity that is, or is proposed to be, authorized, funded, or undertaken by the agency, and that may adversely affect EFH. The Councils may submit comments to the Secretary and other Federal and State agencies, on actions by Federal or State agencies that may affect the habitat of a fishery resource. The Councils must comment if the activity is likely to substantially affect the habitat of anadromous fish. If the Secretary receives information from a Council, or Federal or State agency, or finds out through other means, that an activity would adversely affect EFH, the Secretary must recommend to that agency measures that would conserve the habitat. Federal agencies must respond to the Secretary and Council within 30 days of receipt of the Secretary's comments. The response must include a description of the measures used by the agency to avoid, mitigate, or offset the impact of the activity on EFH. If appropriate, the response must include an explanation for not following the recommendations.

Legislative history:

The habitat sections of the Sustainable Fisheries Act strengthen the previous habitat protection measures in the Magnuson-Stevens Act and reflect an increasing concern that the health of fishery stocks is linked to habitat. In his floor statement, Senator Hollings stated that habitat protection has become a greater concern because coastal development and pollution threaten the environment and subsequently the health of the fish stocks. Senator Kerry, in his floor statement, pointed out that, if you destroy the habitat, you destroy the nurseries and the ecosystem upon which these nurseries depend, which in turn diminishes the ability to have a sustainable fishery. While there are many differences between the House and Senate versions of the habitat sections, both clearly indicated the same concern with habitat protection through first the identification of EFH and then the consultation process.

Issues:

NMFS is currently working on guidance to the Councils for the description and identification of EFH, including adverse impacts, and conservation and enhancement measures. NMFS established a working group to handle the EFH requirements of the Sustainable Fisheries Act, comprised of headquarters staff in HC, SF, and GCF. The regions are also forming EFH work groups to coordinate the regional EFH work. An Advance Notice of Proposed Rulemaking (ANPR) was published on November 8, 1996, to solicit comments and information. A second ANPR was published on January 9, 1997. NMFS used the ANPR to announce the availability of, and request comments on, the Framework for the Description, Identification, Conservation, and Enhancement of Essential Fish Habitat. The Framework includes a means to describe and identify EFH, both in written form through a detailed description of the habitat requirements of the managed species, including its current and historical locations, and some form of mapping the geographical extent of the habitat. The Framework includes a four-tiered approach to EFH identification and description based on the amount of data available on a particular species and the scientific understanding of the relationship between habitat quantity and quality and fish production. Level one represents the least amount of data available, just presence/absence of the species. EFH would be everywhere the species occurs. As the amount of information increases, the size of EFH may change, depending on what the data indicate. Level four represents the most information including the relation of production rates of a species to habitat type and location. The Framework includes a tiered approach to the identification of adverse impacts to EFH based on the amount of data available. Adverse impacts include impacts from fishing gear. Tier one identification of adverse impacts would include a description of the impacts and, if possible, a map showing the location of these impacts. Tier two would add an evaluation of the status and trends of EFH. Tier three would include an evaluation of the cumulative impacts of adverse impacts, including an ecological risk assessment. Another issue is how to determine the appropriate conservation and enhancement measures for EFH. The Framework ties this in with the adverse impacts section because the two are closely related. The Framework also includes procedures to implement the consultation requirement. NMFS is considering the most efficient means to handle the consultation so that EFH receives appropriate protection, while not placing more of a burden on ourselves, other Federal agencies, the Councils, and applicants. The requirement for NMFS to comment on all Federal and some State actions that would adversely affect EFH could result in the agency's reviewing tens of thousands of proposed activities annually. This is a significant increase over the current permit review handled by NMFS regions. The Framework has three levels of permit review. The first is a general concurrence for activities that would have only minimal adverse impact on EFH. An abbreviated consultation procedure could be the next step for activities that would require an individual review by NMFS because of their adverse impacts on EFH. The third level of review could be an expanded consultation for projects that would take a lot of the agency's time to review and develop recommendations for conserving EFH. There are some inconsistencies in the consultation requirement that need to be addressed. One is that, while the Councils comment on the action to the Secretary and the appropriate Federal or State agency, there is no requirement that anyone give the Councils notice of the activity. NMFS is considering methods to provide notice to the Councils. Another apparent inconsistency is that, while the Councils and Secretary comment on actions by Federal and State agencies, there is no requirement for the States to consult with either the Secretary or the Councils. NMFS is considering how best to work with the States on this point.

b. Emergency actions and interim measures.

Summary:

The effective periods for emergency rules are doubled, to 180 days each. The extension for a second 180 days is conditioned on a comment period on the initial emergency rule. A further condition for Council-recommended rules is that the Council must be actively preparing an FMP, amendment, or permanent regulations to address the situation. Rules responding to a public health emergency or an oil spill may remain in effect as long as the emergency circumstances exist, if the public has an opportunity for comment. For public health emergencies, HHS must concur with "the Secretary's action." This provision also allows for "interim measures" to respond to overfishing situations. Interim measures work just like emergency rules, except that there need be no showing of an emergency. They are interim final rules that may remain in effect for 180 days with a 180-day extension. The only trigger is the existence of overfishing; the rule must respond directly to the overfishing problem. See the discussion of  109(e) concerning national standard 1.

Issues:

HHS's concurrence with "the Secretary's action" on the duration of the emergency rule is unclear. Perhaps the best interpretation is that NMFS should consult with HHS (FDA) periodically about whether the rule should be continued or rescinded.

c. Effect of certain laws on certain time requirements.

Summary:

This is a technical amendment, substituting E.O. 12866 for E.O. 12291.

d. Negotiated conservation and management measures.

Summary:

This section allows a Council to establish a fishery negotiation panel to develop management measures. The Secretary may also employ such panels for overfished fisheries requiring Secretarial regulation, Atlantic HMS fisheries, or others with the Council's approval. By mid-April 1997, NMFS is to promulgate regulations governing such panels, in cooperation with the now-defunct Administrative Conference. The procedures are to be "comparable" to those under the Negotiated Rulemaking Act (NRA). A negotiation panel's report must specify the consensus reached by the panel, and is to be published in the Federal Register. Councils and the Secretary, however, need not use any of the report in developing management measures for the fishery.

Legislative history:

Senator Snowe proposed this provision. The Senate report says "it is expected that the Council and Secretary would carefully consider all such recommendations" from negotiation panels, although they are not required to accept them.

Issues:

An issue, for fisheries requiring Secretarial regulation under section 304(e)(5), is that the nine-month schedule may not fit with a formal negotiated rulemaking exercise.

d. Central registry system for limited access system permits.

Summary:

This section requires the Secretary to establish a central registry, by April 11, 1997, for all "limited access system permits" established under Federal law. Limited access system permits specifically include IFQs. The registry must provide for the registration of title to, and security interests in, these permits, and it must be accessible to the public. Procedures must be developed to deal with changes of title pursuant to involuntary transfers, judicial or nonjudicial foreclosures, enforcement of judgments, and related matters. The new central registry will be the exclusive means of perfecting title to, and security interests in, limited access system permits, with a special exception for Federal tax liens. (The procedures for filing Federal tax liens on limited access system permits are governed by the Internal Revenue Code at 26 U.S.C. 1 et seq.) "Security interests" include "security interests, assignments, liens and other encumbrances of whatever kind." Lien priority will be determined based on time of filing with the registry, the first to file having the highest priority. In the event that a permit subject to a Federal tax lien is being sold, the Secretary must notify both the buyer and seller of the Federal lien's existence. However, there is no such requirement for notifying lenders registering security interests of existing Federal tax liens. This section also establishes a new fee requirement and creates a special fund. The Secretary is required to collect a fee of no more than 0.5 percent of the value of the permit upon either the registration of title or the transfer of title to the permits. The statute does not authorize collection of a fee upon the registration of a security interest. The fees collected here are to be deposited into a special fund for administering the registry and for implementing the Magnuson-Stevens Act in the fishery in which the fees are collected. Although the registry must be "central," the statute allows the option of administering it regionally. The statute also allows the option of contracting out the administration of the registry. The Secretary must implement this section through regulations after consulting with the Councils and providing opportunity for public comment.

Legislative History:

This provision originated in the Senate, and was designed to facilitate the use of permits as collateral for loans. As the Senate Committee on Commerce, Science, and Transportation reported, "Many participants in limited access system fisheries use permits as loan collateral to finance the acquisition of the permit itself or to otherwise finance their operations. While loans for vessels can be secured with a preferred ship mortgage filed in a central registry administered by the Coast Guard...currently there is no comparable mechanism for limited access system permits...." The Committee went on to describe the central purpose of the registry as providing the "exclusive means of perfecting security against third parties without notice. The registry system should reduce the risk that security granted by a permit holder will be encumbered by someone else, and reduce the transaction costs associated with financing limited access system permits. The registry system would be exclusive and administered centrally, thereby eliminating the uncertainty presently facing lenders and other secured parties as to the appropriate jurisdiction in which to file. However, the Committee anticipates that the system would be administered on a regional basis, within the region where the particular fishery management plan has been developed, to increase convenience and to eliminate the need to file in multiple jurisdictions or regularly check filings." The Committee also noted its intent that the Secretary rely on other applicable law, including the Uniform Commercial Code, with respect to matters not provided for by the new section in creating the registry system. Despite opposition from Congressmen Frank and Riggs, the provision was incorporated into the final version of the bill that the House ultimately accepted. The main source of opposition to this provision seemed to be the additional fee imposed on the permit holders and confusion as to whether participation in the registry would be mandatory. During floor debate, Congressmen Frank and Riggs characterized the provision as a new, involuntary tax on fishermen. However, earlier on the same day, Congressman Young had inserted into the record his own "clarifications" of what the provisions require. According to him, "[w]hile establishment of the lien registry system by the Secretary is mandatory, participation in the system by the limited access permit holders is not. It is the intent of the Congress that any permit holder registering a permit with the system comply with the requirements of this subsection, including paying any applicable fees. However, it is not the intent of the Congress that all permit holders register with the system; this is a discretionary action that each permit holder must decide to take after weighing the costs and benefits of participating in the system." There was also some confusion as to what value would be attributed to the permits. Congressman Frank stated that this was left ambiguous. In reference to the fees established here, Senator Stevens mentioned that "[a]ny fees collected on the ex-vessel value of the fish harvested under an IFQ system can be spent only in the fishery in which they were collected." With regard to the requirement that the Secretary notify the buyer and seller of a permit when the Secretary of the Treasury has filed a Federal tax lien on the permit, Senator Stevens interprets the act to require the Secretary to make the determination of whether the Secretary of the Treasury has filed any. Senator Stevens also clarified the intent of Congress that, consistent with the requirements of the Internal Revenue Code of 1986, the Secretary of the Treasury may withdraw a notice of a lien filed against a permit if the withdrawal will facilitate the collection of a tax liability by allowing the owner of the permit to derive income from the use of the permit.

Issues:

NMFS is planning to publish a more detailed explanation of its interpretation of this section in an advance notice of proposed rulemaking, to be published in March 1997. Here are some of the major issues: 1. Federal tax liens: How does the Secretary find out when the IRS has filed a lien on a permit that is being sold? The SFA requires the Secretary to notify the buyer and seller of a permit if a Federal tax lien has been filed against the permit. However, the IRS is under no obligation to notify the Secretary when it files such a lien. The SFA indicates that Federal tax liens on permits "shall be perfected exclusively in accordance with the Internal Revenue Code." Pursuant to the Internal Revenue Code, the IRS perfects liens against personal property by filing in either a state office or a U.S. District Court. 25 USC 6323(f). The IRS has no duty to notify the Secretary when it files liens against limited access permits. Thus, this statute has created an administrative burden for NMFS to track IRS filings. NMFS will contact the IRS and attempt to establish a cooperative procedure. Apparently a previous version of the Manager's amendment to S. 39 would have required the IRS to perfect interests in limited access permits using the same procedures as everyone else, but this provision was taken out. Ironically, the IRS will continue to face the jurisdictional challenges to perfecting its interests that led the banking industry to push for a central registry. If Congress amends the Act again to tie up loose ends, this might be a good issue to address. 2. Scope: Which permits are included? The Act does not define "limited access permits" other than to say that they include all IFQs, and limited access permits established under the Magnuson Act or other Federal law. A literal reading of this language might extend the scope of the registry to include permits for activities unrelated to fishing. However, NMFS will interpret this provision to include only those "limited access system permits" that pertain to fisheries. Also, while there are some limited access fisheries administered by States (e.g., Alaska salmon), this registry will only include permits for Federal limited access systems. Another scope question was whether NMFS has the leeway to include only transferable permits in the registry. The statute is ambiguous in this regard. NMFS has determined that approximately 40 percent of all limited access system permits have no market value because they cannot be independently bought or sold. Thus, including them in the registry would create an administrative burden with no clear benefits. NMFS will propose in the ANPR to exclude non-marketable permits from the registry. 3. Where should the registry be located? The Senate Committee anticipated "that the system would be administered on a regional basis, within the region where the particular fishery management plan has been developed, to increase convenience and to eliminate the need to file in multiple jurisdictions or regularly check filings." However, the statute gives NMFS the option of implementing the program centrally or regionally. NMFS considered establishing a separate registry for each fishery that implements a limited access system. However, this approach seems unduly burdensome and would duplicate effort. NMFS also considered creating a single central registry with local filing centers in each region. This would create the possibility that two people could fax in lien notices to two different offices at the exact same time, making it impossible to determine priority. NMFS will propose to implement one, central registry and to locate it in the Alaska region. Ninety percent of the limited access permits are located in the Alaska region. In addition, that region already operates an unofficial registry and has a significant amount of relevant data already on file. 4. Would participation in the registry be mandatory or voluntary? Legislators disagreed over whether participation in the registry should be mandatory or voluntary. The text of the statute does not answer this question. A permit holder seeking a loan would presumably agree to register voluntarily, but other permit holders have no incentive (in fact have a disincentive) to register their permits and pay the fee. Without mandatory registration, it would be difficult for hostile lienors to register their interests against unregistered permits. On the other hand, it is likely that many permit holders will never use the lien registry system, and it seems unfair to force them to subsidize the system. NMFS will propose two alternative approaches and solicit comments in the ANPR. One approach would be to establish a system in which registration is mandatory. NMFS would enter the title information for all limited access permits into the registry, and automatically bill every permit holder. The other approach would call for voluntary registration only, unless/until a third party sought to file a lien against an unregistered permit. In this event, NMFS would enter the data for the unregistered permit into the registry and bill the permit holder. Under either scenario, everybody who registers under the new system would have to pay the registration fee, regardless of their current listing in the Alaska region's existing unofficial registry. 5. Should NMFS administer the registry in-house or contract out this duty? The statute gives NMFS the option of contracting out the administration of the registry. This issue sparked debate within NMFS. Some people advocated contracting out, since the registry will involve a whole new regulatory area with which NOAA has little experience. Others, however, felt that, because the registry is intended to be permanent and will deal with sensitive financial issues, its maintenance is an inherently governmental function. As discussed above, NMFS will propose operating the program in-house out of the Alaska region. An attorney from the Commerce Department's Office of Financial Litigation has provided assistance in developing the ANPR and will continue to provide guidance on registry issues. 6. How should fees be assessed? What is the value of a permit? The statute requires the collection of fees, which are not to exceed "one-half of one percent of the value of the permit," upon registration of title, and upon transfer of title. What is the market value of the permit? Is it related to the ex-vessel value of the fish that can be harvested under the permit? If so, how do you calculate the value before the specifications are set and the fish sold? If funds are gathered regionally and deposited centrally, there may be a co-mingling of funds problem. NMFS has not resolved all of these issues. However, NMFS does have data on permit transfers that could help establish market value. Approximately 2,300 permits are transferred each year. It would be possible to calculate the average price of the permits based on this data, then to develop a value schedule on which to base the registration fee. Transfer fees could be based on the purchase price, except in the event of gifts, inheritances, trades, etc. NMFS is soliciting comments on how best to establish value. 7. What kind of encumbrances are included? Although this system was intended to facilitate intentional encumbrances (i.e., loans on permits), since the statute makes this registry the exclusive means of perfecting an interest in a limited access permit, the registry will also include involuntary encumbrances, such as judicial and statutory liens. 8. How will the registry deal with involuntary transfers of title, including nonjudicial foreclosure? NMFS is proposing procedures for nonjudicial foreclosure similar to those set out in the UCC. NMFS will recognize transfers of title effected through nonjudicial foreclosure under either of two circumstances: (a) if all secured parties junior to the secured party seeking the nonjudicial foreclosure consent in writing; or (b) the party seeking the nonjudicial foreclosures complies with strict notification procedures, and no party holding a junior security interest objects. NMFS would continue to enforce limitations on qualifications for permit ownership. 9. Should standards be developed to determine the validity of a "filing"? NMFS proposes to develop a standardized form to be filed with other specified materials upon the filing of liens. However, NMFS will not be responsible for assuring that the documents filed are complete and correct. Disputes regarding these issues will be left for resolution in other forums, such as the courts. 10. If a secured permit is revoked (e.g., for fraud), is the lender still protected? Will the registry protect the interests of fishermen as well as lenders? The registry will not be responsible for protecting interests of any sort. It is solely a source of information about liens that have been filed, and their priority. 11. As to the priority of liens, does the "first in time, first in line" provision depart from traditional UCC law? Is there a danger that someone may lose priority because of this new law? The "first in time" provision appears to be consistent with existing practice under the UCC. Additional issues arising under this section are discussed below in section 110(e), the transitional period provision. 12. How are we going to meet the statutory deadline? Work is underway to get the registry up and running. NMFS plans to publish an ANPR in March 1997. However, due to the complexity of the issues involved, and the need to obtain public comments on so many issues, it will be difficult for NMFS to issue a final regulation establishing the registry by April 11, 1997. 13. Additional questions: Does the Secretary have an interest in encouraging the transfer of title, since he will collect a fee for each transfer? How does this relate to the Secretary's role as neutral registrar? What is NMFS's potential liability if an administrative mistake costs a lender his place in line? Can NMFS protect itself against this liability? What has the Coast Guard done to protect itself (in administering the vessel lien registry)? e. Registry transition. [no MSFCMA amendment] Summary: Section 110(e) provides for a transitional period. Parties with security interests that are "effective and perfected under other applicable law on the date of the final regulations" implementing the registry will have 120 days from the date of publication to submit evidence of the perfection of such security and become registered in the central registry maintaining their priority. Issues: Is there any "other applicable law" other than the UCC under which a party could have previously perfected a security interest? Currently, the Alaska region is operating an unofficial registry that parties may use to track and register security interests in permits. Because this unofficial registry is not authorized by any other applicable law, parties will not maintain any priority based on participation in that registry.
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