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

DEPARTMENT OF COMMERCE

National Oceanic and Atmospheric Administration

15 CFR Part 902

50 CFR Parts 679 and 6805

[Docket No. 040831251-5032-02; I.D. 082504A]

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:

Final rule.

SUMMARY:

NMFS issues a final rule 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 or Program). Congress amended the Magnuson-Stevens Fishery Conservation and Management Act (Magnuson-Stevens Act) to require the Secretary of Commerce to approve and implement the Program. The 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:

Effective on April 1, 2005.

ADDRESSES:

Copies of Amendments 18 and 19, the Final Regulatory Flexibility Analysis (FRFA), and the Environmental Impact Statement (EIS) for this action may be obtained from the NMFS Alaska Region, P.O. Box 21668, Juneau, AK 99802, Attn: Lori Durall, and on the Alaska Region, NMFS, Web site 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.

Written comments regarding the burden-hour estimates or other aspects of the collection-of-information requirements contained in this final rule may be submitted to NMFS, Alaska Region, and by e-mail to

David_Rostker@omb.eop.gov,

or fax to 202-395-7285.

FOR FURTHER INFORMATION CONTACT:

Susan Salveson, 907-586-7228 or

sue.salveson@noaa.gov.

SUPPLEMENTARY INFORMATION:

In January 2004, the U.S. Congress amended section 313(j) of the Magnuson-Stevens Act through the Consolidated Appropriations Act of 2004 (Pub. L. 108-199, section 801). As amended, section 313(j)(1) requires the Secretary to approve and implement by regulation the Program, as it was approved by the North Pacific Fishery Management Council (Council) between June 2002 and April 2003, and all trailing amendments, including those reported to Congress on May 6, 2003. In June 2004, the Council consolidated its actions on the Program into the Council motion, which is contained in its entirety in Amendment 18. Additionally, in June 2004, the Council developed Amendment 19, which represents minor changes necessary to implement the Program. The Notice of Availability for these amendments was published in the

Federal Register

on September 1, 2004 (69 FR 53397). NMFS approved Amendments 18 and 19 on November 19, 2004.

NMFS published a proposed rule to implement Amendments 18 and 19 in the

Federal Register

on October 29, 2004 (69 FR 63200). NMFS solicited public comments on the proposed rule through December 13, 2004. NMFS received 49 letters of public comment. NMFS summarized these letters into 234 separate comments, and responded to them under Response to Comments, below.

The Program allocates 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/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 addresses conservation and management issues associated with the current derby fishery, reduces bycatch and associated discard mortality, and increases the safety of crab fishermen by ending the race for fish. Share allocations to harvesters and processors, together with incentives to participate in crab harvesting cooperatives, will increase efficiencies, provide economic stability, and facilitate compensated reduction of excess capacities in the harvesting and processing sectors. Community interests are 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 address the response to public comments and changes in the rule from proposed to final. Please refer to the proposed rule for additional information on the Program.

Crab Rationalization Program Overview

The Program applies 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° W. long., Eastern Aleutian Islands (Dutch Harbor) golden king crab—east of 174° W. long., Western Aleutian Islands (Adak) red king crab—west of 179° W. long., 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. A License Limitation Program (LLP) license will no longer be required to participate in these crab fisheries.

Several crab fisheries under the FMP are 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° W. long., and the Bering Sea golden king crab, scarlet king crab (

L. couesi

), triangle Tanner crab (

C. angulatus

), and grooved Tanner crab (

C. tanneri

) fisheries. An LLP license will be required to participate in the FMP crab fisheries excluded from the Program.

Harvest Sector

Qualified harvesters are allocated quota share (QS) in each crab fishery. To receive a QS allocation, a harvester must hold a permanent, fully transferable LLP license endorsed for that crab fishery. Using LLP licenses for defining eligibility in the Program maintains current fishery participation. 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. A harvester's allocation of QS for a fishery is based on the landings made by his or her vessel in that fishery. Specifically, each allocation is 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 is 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 will be issued in two classes, Class A IFQ and Class B IFQ. Crabs harvested with Class A IFQ will require delivery to a processor holding unused processing quota. Class A IFQ landings also will be subject to a regional delivery requirement. Under this regional requirement, landings will be delivered either in a North or in a South region (in most fisheries). Crabs harvested with Class B IFQ can be delivered to any processor and will not be regionally designated. Landings in excess of IFQ will be forfeited in all cases. Class B IFQ are intended to provide ex-vessel price negotiating leverage to harvesters. For each region of each fishery, the allocation of Class B IFQ will be 10 percent of the total allocation of IFQ to the CV sector.

Transfer of QS and IFQ, either by sale or lease, will 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 must meet specific eligibility criteria. Initial recipients of QS, CDQ groups, and eligible crab community entities are exempt from the transfer eligibility criteria.

Separate caps will be imposed to limit the amount of QS and IFQ a person can 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 are established for CDQ groups, which represent rural western Alaska communities. Processor holdings of QS will also be limited by caps on vertical integration. Quota share holders can retain and use initial allocations of QS above the caps.

Crew Sector

To protect their interests in the fisheries, qualifying crew will 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, requires that these shares be initially issued to individuals who hold a State of Alaska Interim Use Permit. In most cases, this individual will 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 will be based on the same qualifying years and computational method used for QS allocations to LLP license holders. Crew (C) QS will 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 can be used only when the IFQ holder is on board the vessel.

To be eligible to receive an allocation, an individual is required to have historic and recent participation. Historic participation is demonstrated by at least one landing in each of three of the qualifying years. Recent participation is demonstrated by at least one landing in two of the three most recent seasons, with some specific exceptions.

CV Crew IFQ (called CVC IFQ) will be required to be delivered to shore-based processors for processing. CVC IFQ is not subject to specific delivery requirements until July 1, 2008. After July 1, 2008, CVC IFQ will 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 intends to review CVC IFQ landing patterns to determine whether the distribution of landings among processors and communities of CVC IFQ differs from the distribution of IFQ landings.

CP crew will be allocated CPC QS and IFQ that include a harvesting and on-board processing privilege. Crab harvested with CPC IFQ also can be delivered to shore-based processors.

Crew QS and IFQ can be transferred to eligible individuals. Leasing of Crew IFQ is permitted before July 1, 2008. After July 1, 2008, leasing will 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. Use caps apply to individual Crew QS holdings.

Processing Sector

A processing privilege, analogous to the harvesting privilege allocated to harvesters, will be allocated to processors. Qualified processors will 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. The annual allocation of pounds of crab based on the PQS is IPQ. IPQ will be issued for 90 percent of the IFQ allocated harvesters, equaling the amount of IFQ allocated as Class A IFQ. Processor privileges will not apply to the remaining TAC allocated as Class B IFQ, or for Crew IFQ until July 1, 2008. IPQs will be regionally designated for processing (corresponding to the regional designation of the Class A IFQ).

PQS allocations are based on processing history during a specified qualifying period for each fishery. A processor's initial allocation of PQS in a fishery will equal its share of all qualified pounds of crab processed in the qualifying period. Processor shares are transferable, including the leasing of IPQs and the sale of PQS, subject to caps and to community protection measures. IPQs can be used without transfer at any facility or plant operated by a processor. New processors can 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.

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

Catcher/Processor Sector

Catcher/processors (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 is 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 will be allocated CP QS in accordance with the allocation rules for QS for all qualified catch that was processed on board. These shares represent a harvest privilege and an on-board processing privilege. Catcher/Processor QS does 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 will be created in most fisheries. The North region is all areas in the Bering Sea north of 56°20′ N latitude. The South region is all other areas. Catcher vessel QS, Class A IFQ, PQS, and IPQ will be regionally designated. Crab harvested with regionally designated IFQ will be required to be delivered to a processor in the designated region. Likewise, a processor with regionally designated IPQ is required to accept delivery of and process crab in the designated region. Legal landings in a region in the qualifying years will 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 will be designated as west shares to be delivered west of 174° W. longitude. The remaining 50 percent of the Class A IFQ and IPQ will have no regional designation and will not be subject to a regional delivery requirement. The west designation will 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 will 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.

Crab Harvesting Cooperatives

Harvesters may form voluntary crab harvesting cooperatives in order to collectively harvest their IFQ holdings. A minimum membership of four unique QS holders is required for crab harvesting cooperative formation. A crab harvesting cooperative is required to apply for a crab harvesting cooperative IFQ permit. The crab harvesting cooperative IFQ permit will display the aggregate amount of IFQ in each crab fishery that will be yielded by the collective QS holdings of the members. IFQ could be transferred between crab harvesting cooperatives, subject to NMFS’ approval. For inter-cooperative transfers, the crab harvesting cooperative will need to designate the crab harvesting cooperative member engaged in the transaction for purposes of applying the use cap of that member to the IFQ that is being transferred to the crab harvesting cooperative. Crab harvesting cooperative members will be allowed to leave a crab harvesting cooperative or change crab harvesting cooperatives on an annual basis prior to the August 1 deadline for the annual crab harvesting cooperative IFQ permit application. Vessels that are used exclusively to harvest crab harvesting cooperative IFQ will not be subject to use caps. Crab harvesting 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 are those with 3 percent or more of the qualified landings in any crab fishery included in the Program. Based on these criteria, NMFS has determined that the following crab communities meet this criteria: Adak, Akutan, Unalaska, 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 can not be transferred from those communities. The use of IPQ outside the community during this period is limited to 20 percent of the IPQ and for specific hardships. PQS and IPQ from three crab fisheries are exempt from the cooling off provision: Tanner crab, Western Aleutian Islands red king crab, and Western Aleutian Islands golden king crab.

IPQ issuance limits.

IPQ issuance limits are established to limit the annual issuance of IPQ 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 will not be required to be delivered to a processor with IPQ but will be subject to the regional delivery requirements.

Sea time waiver.

Sea time eligibility requirements for the purchase of QS are waived for CDQ groups and community entities in ECCs, allowing those communities to build and maintain local interests in harvesting. CDQ groups and ECCs are eligible to purchase PQS but are not permitted to purchase Crew QS.

Right of first refusal (ROFR).

ECCs, except for Adak, will have a ROFR on the transfer of PQS and IPQ originating from processing history in the community if the transfer will result in relocation or use of the shares outside the community. Adak is not eligible for the ROFR provision because Adak will 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) have a ROFR on the transfer of PQS and IPQ from communities in the GOA north of 56°20′ N. latitude.

Community Development Quota Program and Community Allocations

Community Development Quota Program.

The CDQ Program is 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 are increased from 7.5 to 10 percent of the TAC. The increase will not apply to the CDQ allocation of Norton Sound red king crab because this fishery is excluded from the Program. The crab CDQ fisheries will be managed as separate commercial fisheries by the State under authority deferred to it under the FMP. The State will establish observer coverage requirements, State permitting requirements, and transfer provisions among the CDQ groups. It also will monitor catch to determine when IFQ have been reached, enforce any penalties associated with IFQ 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) are 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.

CDQ groups can participate in the crab fisheries as holders of both QS and PQS. Some CDQ groups will be initial

recipients of QS because they hold LLP licenses and the appropriate catch history. In addition, CDQ groups are exempt from the transfer eligibility requirement related to sea time so they are eligible to obtain QS by transfer, subject to QS use caps for CDQ groups. CDQ groups also will be able to obtain PQS by transfer because there are no transfer restrictions on who can hold PQS. While harvesting crab with IFQ, CDQ groups are subject to the same regulations as apply to other IFQ holders. The purchase and holding of QS and PQS by the CDQ groups is subject to the administrative regulations for the CDQ Program at 50 CFR part 679. These regulations include information on 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 will be made to the community of Adak. The allocation to Adak will 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” is deferred to the State under the FMP. NMFS will have no direct role in oversight of the use of this allocation. The State will 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 will 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 will 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 will be called an eligible crab community organization (ECCO).

Protections for Participants in Other Fisheries

The Program will greatly increase the flexibility for crab fishermen to choose when and where to fish for their IFQ, and this increased flexibility will provide crab fishermen with increased opportunity to participate in other fisheries. Restrictions on participation in other fisheries, also called sideboards, will restrict a vessel's harvests to its historical landings in all GOA groundfish fisheries (except the fixed-gear sablefish fishery). Restrictions will be applied to vessels but will 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 will 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 resolve failed price negotiations 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 deliveries will 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 will 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 formula by an arbitrator who has consulted with fleet representatives and processors. Information provided by the sectors for these reports will be historical in nature and at least 3 months old. This non-binding price will guide the above described negotiations. Information sharing among IPQ and IFQ holders, collective negotiations, and release of arbitration results will be limited to minimize the antitrust risks of participants in the Program. The participants in the Arbitration System will also select Contract Arbitrators who will assist in Binding Arbitration.

The binding arbitration procedure is 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 will select between the IFQ holder'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 will coordinate monitoring and enforcement of the crab fisheries. Harvesting and processing activity will need to be monitored for compliance with the implementing regulations. Methods for catch accounting and catch monitoring plans will generate data to provide accurate and reliable round weight accounting of the total catch and landings to manage QS and PQS accounts, prevent overages of IFQ and IPQ, and determine regionalization requirements and fee liabilities. Monitoring measures will 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, will be collected on a periodic basis from the harvesting and processing sectors. The data will be used to study the economic impacts of the Program on harvesters, processors, and communities. Pursuant to section 313(j) of the Magnuson-Stevens Act, the data and identifiers will also be used for

Program enforcement and determination of qualification for QS. Consequently, identifiers and data will be disclosed to NOAA Enforcement, NOAA GC, the Antitrust Division of the Department of Justice, the Federal Trade Commission, and RAM. With limited exceptions, participation in the data collection program is mandatory for all participants in the crab fisheries.

Cost Recovery and Fee Collection

NMFS will 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 will be paid in equal shares by the harvesting and processing sectors and will be based on the ex-vessel value of all crab harvested under the Program, including CDQ crab and Adak crab. NMFS also will 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 is authorized, which provides 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) will be created. This program will be funded by 25 percent of the cost recovery fees as required by the Magnuson-Stevens Act. Loan money will be accessible only to active participants and could be used to purchase either QS or Crew QS. Quota share purchased with loan money will be subject to all use and leasing restrictions applicable to Crew QS for the term of the loan. This final rule does not contain regulations to implement the crew loan program. The loan program will be developed by NMFS Financial Services.

Annual Reports and Program Review

NMFS, in conjunction with the State of Alaska, will produce annual reports on the Program. Before July 1, 2007, the Council will review the PQS, binding arbitration, and C share components of the Program. After July 1, 2008, the Council will conduct a preliminary review of the Program. A full review of the entire Program will be undertaken in 2010. Additional reviews will 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 will examine the impacts of the Program on vessel owners, captains, crew, processors, and communities, and include an assessment of options to mitigate negative impacts.

Summary of Regulation Changes in Response to Public Comments

This section provides a summary of the major changes made to the final rule in response to public comments. All of the specific changes, and the reasons for making these changes, are contained under Response to Comments.

Harvester, Crew, and Processor Sectors

The following significant changes from the proposed to final rule in response to public comments are necessary to meet the requirements of Amendment 18 and 19. In the final rule NMFS:

(1) Revised the way in which Class A IFQ and Class B IFQ are allocated to individual IFQ holders who hold PQS or IPQ, or who are affiliated with PQS or IPQ holders, so that Class A IFQ is issued in proportion to the amount of IPQ that is held by the IPQ holder or affiliates.

(2) Revised the definition of “affiliation” to clarify the term “otherwise controls”.

(3) Clarified that CVC QS and IFQ are not subject to regional designation and the Class A and Class B IFQ assignment for the first three years of the program—until July 1, 2008.

(4) Revised the QS use caps that apply to non-individual PQS and IPQ holders so that the application of those caps considers the QS holding of that PQS and IPQ holder and the total QS holdings of all persons affiliated with that PQS or IPQ holder.

(5) Revised the PQS and IPQ use caps that apply to PQS and IPQ holders so that the PQS or IPQ holdings of that PQS or IPQ holder and the total PQS or IPQ holdings of all persons affiliated with that PQS or IPQ holder are used in the calculation of the PQS or IPQ holder's caps.

(6) Clarified that an “individual and collective” rule applies for computing QS use caps for individual PQS holders, CDQ groups, and all other QS holders. This methodology sums all QS holdings by a person and the percentage of ownership by that person in any QS holding entity. This method is more consistent with Amendment 18.

(7) Added provisions on applying limits on the amount of “custom processing” that may be undertaken at any one processing facility, or at any facility, or group of facilities that is owned by an IPQ holder.

(8) Clarified the limited exemption that applies to using legal landings based on the activities of a vessel which received an LLP by transfer in order to remain in a fishery.

Crab Harvesting Cooperatives

In response to Council and public comments, NMFS removed the requirement in § 680.21 that crab harvesting cooperatives be formed under the Fishermen's Collective Marketing Act (FCMA, 15 U.S.C. 512). With this change, QS holders that hold PQS and IPQ, as well as QS holders affiliated with PQS and IPQ holders, can participate in crab harvesting cooperatives. To address antitrust concerns, NMFS: (1) Clarified that issuance of a crab harvesting cooperative IFQ permit is not a determination that the crab harvesting cooperative is formed or is operating in compliance with antitrust laws; and (2) added that members of crab harvesting cooperatives, that are not FCMA cooperatives, should consult counsel before commencing any activity under the crab harvesting cooperative if members are uncertain about the legality under the antitrust laws of the crab harvesting cooperative's proposed conduct. Additionally, NMFS added definitions of crab harvesting cooperatives and FCMA cooperatives at § 680.2.

Additionally, NMFS changed the regulations at § 680.42(c)(5) so that a CVC or CPC QS holder is subject to the owner on board restriction regardless of whether he or she joins a crab harvesting cooperative. NMFS revised the final rule at § 680.21(a)(1)(iii)(B) to allow CVC QS holders who join a crab harvesting cooperative to withhold their Class B IFQ from submission to the crab harvesting cooperative. This will take effect after the third year of the Program when CVC QS becomes subject to the Class A/Class B IFQ split. NMFS revised the final rule at § 680.21(a)(1)(iii)(A)-(B) to permit QS holders to hold memberships in one crab harvesting cooperative per fishery. If a QS holder joins a crab harvesting cooperative for fishery, all of that QS holder's IFQ for that fishery will be submitted to the crab harvesting cooperative.

NMFS revised intercooperative transfers at § 680.21(e) to require the designation of the members of the crab

harvesting cooperatives that are engaged in the transfer for purposes of applying the use caps of the members to the cooperative IFQ that is being transferred between the crab harvesting cooperatives.

ROFR

The final rule revises proposed provisions for an ECC's ROFR of purchase of PQS or IPQ that is being proposed by a PQS/IPQ holder for use outside the community. These revisions are in response to public comment and are intended to more closely reflect the original intent of the Council. First, the final rule clarifies that an ECC has discretion on whether or not to designate an ECC entity to represent it in ROFR and enter into civil contract arrangements for this purpose. If an ECC entity is not designated within a reasonable period of time, then the ECC permanently waives its opportunity to exercise ROFR. Second, statute terms for civil contracts establishing ROFR between eligible ECCs and holders of PQS/IPQ have been removed from the regulations. Instead, the regulations now refer to the provisions in section 313(j) of the Magnuson-Stevens Act. This approach ensures consistency with the Magnuson-Stevens Act and is appropriate because NMFS does not enforce these contract terms.

Arbitration System

NMFS made the following significant changes from the proposed to final rule in response to public comments. These changes are necessary to meet the requirements of Amendment 18 and 19. In the final rule NMFS:

(1) Clarified that only IFQ holders can initiate the Binding Arbitration procedure.

(2) Revised the timeline for the 2005 season for QS holders and PQS holders to join an Arbitration Organization which is responsible for selecting a group of experts that can assist in price negotiations: the market analyst, formula arbitrator, and contract arbitrator.

(3) Revised the mechanism for exchanging information between uncommitted IPQ holders and uncommitted Arbitration IFQ holders to allow for a third-party to provide data in an arms-length relationship.

(4) Established a minimum of 25 percent of the total IFQ held by an FCMA cooperative that must be committed to an IPQ holder in order to engage in share matching.

(5) Clarified the timing under which a Binding Arbitration procedure must occur and the process whereby it can occur.

(6) Clarified the ability of persons to participate in FCMA cooperatives and collectively negotiate, and the limits to which FCMA cooperatives may exchange information among cooperatives.

(7) Removed the requirement that the transferors require persons receiving QS/IFQ or PQS/IPQ by transfer to join an Arbitration Organization, and requiring the transferees to do that themselves.

(8) Required that CVO IFQ, CVC IFQ after July 1, 2008, and IPQ would not be issued for a crab QS fishery until the Market Analyst, Formula Arbitrator, or Contract Arbitrators have been selected for that fishery.

(9) Clarified the type of Arbitration Organization which a person must join depending on their holdings of QS/IFQ and PQS/IPQ.

Monitoring and Enforcement

NMFS made two major changes to requirements for CPs as a result of public comment. Both changes reduce the burden on participants in the crab fishery. First, NMFS reduced the required reporting interval for crab catch by CPs from once every twenty four hours to weekly. Second, NMFS removed requirements for CPs to provide an observer work area on board their vessels. NMFS also clarified regulations governing the use of the Interagency Electronic Reporting System (IERS) to ensure that vessels that are unable to use the Internet may report catch using an alternative, NMFS approved, method such as an email attachment to report catch.

Economic Data Collection

In response to public comment requesting additional time to prepare and submit the historic EDRs, the submission interval for the EDR is increased from 60 days to 90 days at §§ 680.6(a)(2), 680.6(c)(2), 680.6(e)(2) and 680.6(g)(2), to provide both the time to gather records and complete an accurate EDR. Also in response to public comment, the time interval allowed for verification of data by all submitters is extended in the final rule at § 680.6(i)(2) to 20 days from the 15 days interval identified in the proposed rule.

Cost Recovery and Fee Collection

The cost recovery fee system remains relatively unchanged from the proposed rule. NMFS received only one comment for the cost recovery fee system. NMFS responded affirmatively to this comment by adjusting the methodology by which CPs must calculate and submit fees to reduce any disparity between fees paid by CPs and shoreside processors. An explanation of the revised methodology for CP fee calculation is contained in the response to comments.

Response to Comments

Harvest Sector

Comment 1:

QS should belong to the American public, not fishing industry. It is not fair to the American public to have the interests of only those who enrich themselves have a say over the resource.

Response:

Allocating QS and PQS to fishery participants is a provision of Amendment 18. Section 313(j) of the Magnuson-Stevens Act requires NMFS to implement the Program provisions as specified in Amendment 18.

Comment 2:

If a vessel sinks, it should lose all rights to fish forever.

Response:

The sunken vessel provision that allocates QS to LLP license holders who have had a vessel sink are part of Amendment 18. Under section 313(j) of the Magnuson-Stevens Act, NMFS does not possess the discretion to alter the sunken vessel provision as it exists in Amendment 18. Any change to this provision requires an amendment to the Program and should be addressed with the Council.

Comment 3:

The term “IFQ TAC” used in § 680.40(h)(5)(ii) in the calculation of the Class A IFQ allocation and the IPQ allocation is not defined. Care should be taken in defining the term to show that prior to July 1, 2008, CVC QS yield IFQ that are not subject to the Class A IFQ landing requirements and that IPQ should be issued for 90 percent of the CVO IFQ allocation. After July 1, 2008, CVC QS holders will receive Class A IFQ and IPQ will be issued for 90 percent of the CVO and CVC IFQ allocation. Clarify definition and calculation of IPQ and Class A IFQ allocations.

Response:

NMFS agrees and has modified the final rule at § 680.40(h)(5)(ii) to more clearly reflect the nature of the Class A IFQ, the allocations that may occur, and the definition of CVC and CVO QS and IFQ.

Comment 4:

Section 680.41(c)(2)(ii)(D)(2)(i) and (ii) does not adequately parallel the Council motion. For corporations and other entities, one “owner” (not “member”) must meet the sea time requirement. In addition, that same owner must hold at least a 20 percent ownership interest in the entity. The section does not exactly parallel these requirements. Use language from the Council motion.

Response:

NMFS agrees and has modified the final rule at

§ 680.41(c)(2)(ii)(D)(2)(i) and (ii) to more clearly show that one individual must meet both requirements in order to receive QS or IFQ by transfer. However, the final rule maintains the term “member” because not all persons who may hold QS or PQS will have “owners.” As an example, non-profit corporations don't have “owners.”

Comment 5:

The provisions § 680.41(l)(2) and (4) concerning the transfer of CVO QS and CVC QS, respectively, should be deleted in their entirety. They specifically provide, “Notwithstanding QS use limitations under § 680.42, CVO (CVC) QS may be transferred to any person eligible to receive CVO or CPO (CVC or CPC) QS as defined under paragraph (c) of this section.” These provisions appear to override any use caps contained at § 680.42 (the only section of the regulation defining use caps).

Response:

NMFS agrees and has revised § 680.41(i)(5) in the final rule to clarify that the approval criteria for transfer do not preclude the use caps at § 680.42.

Comment 6:

The rule limiting the acquisition of LLP licenses (and history) in excess of the cap after June 10, 2002, should apply to § 680.42(b)(3) and (4) (CDQ caps and vertical integration caps), as well as the general caps. Add in control date to this section.

Response:

NMFS agrees and has revised § 680.42(a)(1) to accommodate this comment. This revised regulatory text also notes that a “person will not be issued QS in excess of the use cap established in this section based on QS derived from landings attributed to an LLP license obtained via transfer after June 10, 2002,” except under limited conditions addressed under the response to comment 40. This provision would apply to both CDQ groups and the vertical integration caps.

Comment 7:

For CDQ groups, the individual and collective rule should be used to determine holdings for applying the caps at § 680.42(b)(3).

Response:

NMFS agrees and has modified the final rule at § 680.42(b)(3) to clarify that the QS and IFQ use caps apply individually and collectively to CDQ groups to meet the intent of Amendment 18.

Comment 8:

Table 7 mixes the concepts of eligibility and qualification. Eligibility defines the persons eligible to receive an allocation. For CVO and CPO, holders of permanent LLP licenses are eligible for an initial allocation. For CVC and CPC, persons meeting the historical participation requirement (

i.e.

, landings in 3 of the qualifying years for vessels) and recency requirements (

i.e.

, landings in 2 of the 3 most recent years) are considered eligible. Once persons are found eligible, their allocations are based on the qualifying years shown in Column B. The same subset of years would apply to all participants (CVO, CPO, CVC, and CPC). Column E is incorrect. In addition, Columns C and D define CVC and CPC eligibility, not qualification. Revise table to reflect difference between eligibility and qualification.

Response:

NMFS agrees and has revised Table 7 in the final rule to the reflect the difference between eligibility and qualification.

Comment 9:

Table 7 leaves out the season beginning in 1991 for Bering Sea Tanner crab. The seasons shown in (2) and (3) are one season, not two. Revise dates in the table to include the 1991 BS Tanner season.

Response:

NMFS agrees and has revised the dates in Table 7 to include the 1991 BS Tanner crab season in the final rule.

Comment 10:

Table 7 defines seasons with an opening and closing date. Often the last landing of the season is made after the closing date. The regulation should be clear that legal landings made after the closing date will be counted for allocations. Clarify that these landings will count for determining allocations.

Response:

NMFS will consider legal landings made after the closing date of the fishery in the calculation of PQS and QS to be issued provided that the harvests were made during the periods established in Table 7.

Comment 11:

Allocating QS only for fisheries for which the holder's LLP license is endorsed is unfair, inequitable, and dramatically limits the amount of QS an LLP license holder will receive. Specifically, if a vessel has substantial history in a crab fishery, but did not qualify for an LLP license endorsement for that fishery, then the LLP license holder should receive QS based on that history.

Response:

Allocating QS only for catch history in fisheries for which the holder's LLP license is endorsed is a provision of the Council's motion, which is Amendment 18. Section 313(j) of the Magnuson-Stevens Act requires NMFS to implement the Program provisions as specified in Amendment 18. The Council developed the method for distributing QS based on a linkage to permanent fully transferrable LLP license (with limited exemptions) after considerable debate and analysis in the EIS/RIR/IRFA prepared to support Amendment 18 and this final rule.

Comment 12:

NMFS should explain how QS distribution will accommodate resolution of appeals on LLP licenses and on QS allocation after initial QS allocation.

Response:

NMFS anticipates that all LLP license appeals that affect the interim status of crab LLP licenses will be resolved by the time that this action is effective and the application period commences. However, other potential sources of Program application claims, for example, regarding landings and processing histories, will likely not be complete until during or after the application period. Some features of the Program such as one-time permanent regional QS and PQS assignments require that NMFS base its primary initial issuance computations and distribution on as complete a QS/PQS pool as possible. Therefore it is essential that all persons who believe they may be eligible for QS/PQS apply during the open application period, whether or not their LLP license status or other situation makes them ineligible for QS/PQS at that time. NMFS would not issue QS unless and until a person's crab LLP license gained appropriate status or other claim was resolved in their favor by Final Agency Action of RAM, the Office of Administrative Appeals, or the Regional Administrator. At that time, NMFS would issue QS or PQS as appropriate to their application.

However, no distribution of annual IFQ or IPQ would be made for the newly issued QS/PQS until the next time at which NMFS makes a distribution of annual TAC to QS/PQS holders for that crab fishery so as not to disrupt the balance of existing QS and PQS amounts, arbitration agreements, use cap credits, etc. Regional assignments of QS/PQS issued initially but on a delayed basis would be based on original regional ratios computed from data developed for the primary initial QS issuance event.

Comment 13:

Council intent, as stated in Amendment 18, was to calculate each holder's QS as a weighted average. The proposed rule, at § 680.40(c)(2), uses a simple average determined by calculating the holder's percentage in each of the history years, adding up the percentages, and dividing by the number of years. This section should be changed to comply with Council intent. The Council followed AFA, where the boats rejected the simple average approach in favor of adding up all the QS holder's pounds in the aggregate, and then dividing by the aggregate total pounds in all of the history years (weighted average). Guideline harvest level (GHL) volatility in snow crab, for example, illustrates why. The aggregate annual landings vary significantly over the history years, meaning that a QS holder with very high landings in a low

GHL year would get more QS than a consistent participant. Someone who sat out a low GHL year (good idea for the health of the industry and fishery) would be severely penalized.

Response:

The methodology used at § 680.40(c)(2) does use a weighted average when calculating the amount of QS that will be issued. The method requires determining the percentage of the total qualified landings a person and summing up the percentage of the total qualified landings of all persons that are qualified to receive QS. A person's percentage of the total qualified landings is divided by the percentage of the percentage of all the qualified landings in that fishery. This methodology is explained in detail in the preamble to the proposed rule (see 69 FR 63208) and in the final rule at § 680.40(c)(2)(iv).

Comment 14:

The QS pool is so large that overfishing results. Quotas should be cut by 50 percent this year and 10 percent each year thereafter.

Response:

NMFS disagrees. The QS pool represents the portion of available TAC for a fishery that will be allocated to QS holders annually. The QS pool yields IFQ every year which is the pounds of crab the QS holder may harvest, based on the amount of crab available for harvest. Each year, the TAC is determined through a scientific process that is designed to maintain healthy stocks and reduce the risk of overfishing.

Comment 15:

The surviving spouse provision in the proposed rule at § 680.41(n) provides that if a QS holder dies, his spouse has 3 years to lease out his QS. There are no additional regulations in the proposed rule to explain what happens after that time. If this provision is similar to the halibut/sablefish QS surviving spouse provision, then the surviving spouse will have to either sell the QS or qualify to have the QS transferred to their name. They qualify by having 150 days of sea time-fishing only, no tendering or research vessel time. If they do qualify, then they have to be on board during the harvesting and delivery of the product.

This would be a hardship for a surviving spouse of a crab QS holder. Crab fishing is much different than halibut fishing, and provides a large portion of a family's annual income. A surviving spouse probably would not be able to leave the children and job and go out to the Bering Sea to crab fish for weeks at a time, a few times a year, even if she could qualify. I don't think it is the wish or intention of QS holders to leave their spouses and families in such a bind. In these cases, the spouse, along with the QS holder, have made significant personal and financial investment in this fishery.

Response:

Amendment 18 does not make a specific exemption to allow a beneficiary to receive an additional opportunity to lease IFQ or IPQ, other than the provisions established under the rule. In fact, the three year lease period allowed for beneficiaries of QS and PQS to use the IFQ or IPQ is designed to mirror existing leasing by beneficiaries under the halibut and sablefish IFQ program. Extending this limited leasing ability beyond three years would frustrate the overall intent of the Program, which is to limit leasing after several years have transpired.

A beneficiary of QS or PQS may sell the QS or PQS, or fish the IFQ or IPQ themselves after the three year period. Additionally, for CVO and CPO QS, if the beneficiary owns at least 10 percent of a vessel, they can hire someone else to fish the IFQs after the three year period. This provision is unlike the halibut/sablefish IFQ program where second generation QS holders cannot hire skippers to fish for them.

Comment 16:

It is important that any active fisherman who holds Class B IFQ have the ability to transfer those shares to any other active fisherman. For example, an active fisherman who holds Class B IFQ for red king crab and golden king crab should be able to transfer his shares for either or both species to another active fisherman. This accommodates the fact that an active fisherman may have earned IFQ for a species that he is not fishing in a particular season, but should be able to transfer to another active fisherman who is fishing that species in that same season.

Response:

Under the rule, Class B IFQ may be transferred to any eligible recipient mid-season, including an active participant in the fisheries.

Comment 17:

The final rule should clearly instruct RAM to initially allocate our BSAI crab IFQs directly and individually to the owners of IFQ qualified vessels (corporations, LLCs, and partnerships) in proportion to their stock ownership or interest in the vessels that earned each respective BSAI crab fishing history. This will help NMFS avoid numerous, time-consuming transfers and sale procedures, and substantially reduce federal paperwork.

Response:

QS will be issued to the holder of the LLP license at the time of application, and not to the owners of a corporation, or other organization, that holds the LLP license. The exact allocation of QS among the owners of a corporation would be an additional administrative burden on NMFS and the exact allocation may be subject to contractual agreements among the owners that NMFS would be required to interpret and would be subject to appeal. In some cases, owners may wish to have the LLP license holding corporation also hold the QS. NMFS will allocate QS to the entity that holds the LLP license. If the owners of a corporation wish to receive a portion of the QS, that can be accomplished by a subsequent transfer from the QS holding corporation to the corporation's owners. The rule has not been modified.

Comment 18:

The final rule should include a provision that provides for post delivery transfers of IFQ. Too often small errors in estimating the average weight of crab has adversely affect the crew's ability to judge the poundage of crab on board. Allowing transfers of IFQ after delivery would provide vessel operators with the flexibility needed to make the right decisions, and be consistent with national standard 1 of the Magnuson-Stevens Act.

Response:

Transfers of IFQ after deliveries are particularly problematic for NMFS to track and monitor. In particular, NMFS does not have the ability to keep “real time” accounts accurate enough to allow this type of transfer. Amendment 18 does not provide any provisions for IFQ overages or the ability to undertake post-delivery transfers. While there may be some overages in some of the fisheries, NMFS does not anticipate that these overages will be severe in most cases and after the Program has been in place for a period of time, the likelihood of these overages will decrease.

Comment 19:

The final rule should include language that allows flow thru of grandfathered ownership to an individual past the current one percent cap. For example, in the proposed rule an individual is allowed their historic ownership of QS past the one percent cap if earned in the qualification years and vessel history is acquired prior to January 1, 2002. Because QS will be awarded to LLP license ownership groups initially, the regulations should make sure the QS can flow thru to individual owners based on their ownership make up with no penalty assessed if their grandfathered QS exceeds one percent.

Response:

Amendment 18 is clear that the exemption to the QS and IFQ use caps for corporations or other entities that are initially issued QS or IFQ in excess of the use caps do not extend to the individual members that comprise that corporation or other entity. The use cap exemption is limited to the entity that initially received the QS or IFQ, not to its constituent members who can only receive QS or IFQ from the entity

through transfers. Therefore, each member of that entity is subject to the QS and IFQ use caps without exemption. The exemption to the QS and IFQ use caps does not extend to persons who receive QS or IFQ by transfer.

Comment 20:

The proposed rule at § 680.41(l)(2) and (4) incorrectly waives all use caps with respect to harvest shares. The motion establishes use caps.

Response:

NMFS agrees and has modified the wording in the final rule at § 680.42(i)(5). See also response to comment 5.

Comment 21: The proposed rule at § 680.42(b)(4) exempts all PQS holders from the individual IFQ caps and applies a higher use cap to those persons. The motion intended a very limited exemption that would not apply to individuals.

Response:

NMFS agrees and has modified the provision in the final rule at § 680.42(b)(4) to better reflect the intent of Amendment 18 by establishing that individual PQS holders do not receive an exemption to the overall QS and IFQ use cap that applies to non-individual PQS holders who also hold QS or IFQ.

Comment 22:

If all vessels with catch history in the Eastern Aleutian Islands golden king crab fishery in the qualifying years were granted QS then there would not be such a concentration of QS holders in that fishery. Allocating QS only to holders of an LLP license endorsed for that fishery would result in a violation of the excessive shares provision of the Magnuson-Stevens Act.

Response:

NMFS agrees that allocating QS to all vessels with catch history in the fishery would result in more QS holders in that fishery, however, Amendment 18 is clear that QS will only be issued for catch history for which the holder's LLP license is endorsed, with one limited exemption. Section 313(j) of the Magnuson-Stevens Act requires NMFS to implement the Program as specified in Amendment 18.

Comment 23:

In the early stages of the Crab Rationalization Program, it was discussed whether or not golden king crab should be included; as it was a fishery that still had never fully been utilized. Instead of excluding golden king crab, the opposite took place, in that the golden king crab fishery qualification period of 1996-2000, all years, is the most stringent of all crab fisheries. The golden king crab qualifications are further compounded because golden king crab is the only crab fishery that is not allowed to drop one year in its calculations. Not allowing the dropping of a year is a blatant discriminatory measure. The golden king crab IFQ qualification years are years in which the golden king crab fishery GHLs were not fully harvested and the fishery lasted 12 months. The golden king crab fishery GHL has only become fully utilized for the first time in the year 2000. The proposed window of years for golden king crab was when the smallest number of approximately 15-17 vessels, had ever participated in the history of the golden king crab fishery.

The result is a select group of vessels will receive excessive golden king crab QS. Approximately 6 to 8 vessels would receive approximately 70 percent to 80 percent of the QS. Therefore, the golden king crab window of years has disenfranchised many of the other golden king crab LLP license holders; to benefit a select group of excessive share recipients. Golden king crab is the only fishery that “must” use the recent years of history up until implementation, as the GHLs were finally fully harvested.

There was a lot of testimony to the Council requesting the qualification period include the current years in which the GHLs were finally fully harvested. NOAA General Counsel also stated on the record that fishing history up until time of final action should be considered. Additionally the court ruling over the Halibut IFQ lawsuit, stated that fishing history up until final action should be considered. Yet the Council did not consider the years of history beyond 2000.

In conclusion, the qualification period for the golden king crab fishery does not conform to the National Standards under the Magnuson-Stevens Act. National Standards state that no such measure shall have economic allocation as its sole purpose. It is easy to point out that the specific years selected for golden king crab are for the sole purpose of economic allocation to a select few vessels. National standards state that “allocations should be fair and equitable to all fisherman”, not just a select few vessels as in golden king crab fishery. National Standards state that allocations shall be carried out in such a manner that no particular entity acquires an excessive share, not the excessive shares that are proposed in golden king crab fishery. National Standards must be adhered to.

Response:

Amendment 18 establishes the qualifying years for the golden king crab fishery. Section 313(j) of the Magnuson-Stevens Act requires NMFS to implement the Program as specified in Amendment 18. Therefore, this provision does not violate the Magnuson-Stevens Act and the rule has not been modified. The Council considered recent participation in the golden king crab fishery in developing this Program. The allocation of QS or PQS in the golden crab fishery is based on an extensive decision making process and the EIS/RIR/IRFA prepared for this action considered a variety of years for the initial allocation of QS.

Comment 24:

The proposed rule at § 680.40(c)(2)(vii) requires an interim LLP license as a condition of eligibility for an LLP license/catch history exemption contemplated by the Council; and also disallows severability of catch history from an LLP license for initial allocation of QS. Additionally, § 680.40(b)(4)(ii)(B)(E) disallows severability of landings and history from LLP licenses. By requiring an interim LLP license to qualify for the exemption, the proposed rule excludes a vessel for which there was no interim LLP license, but which otherwise would qualify for the exemption. The proposed Council motion did not require an interim LLP license as a qualification for the history exemption, and it was not the intent of the Council to exclude the vessels in question. The final regulations should allow the history exemption for a very limited number of vessels in question (must have conducted a transfer by January 1, 2002) by removing the requirement of an interim LLP license for eligibility under this provision and providing an exception from the proposed rule which disallows severability of landings and catch history from the LLP license.

Response:

NMFS agrees and has modified the final rule at § 680.40(b)(4)(vii) to remove the requirement of an interim LLP license for eligibility under this provision, based on this comment and comments 42 and 43. This provision is intended to address a specific situation in which LLPs were transferred between vessels so that a vessel could legally remain in the fishery. Amendment 18 did not specify that an interim LLP was a requirement to qualify for this provision.

Comment 25:

The proposed rule at § 680.40(h)(4) provides that persons with 10 percent common ownership with a PQS holder would receive all Class A IFQ (and no Class B IFQ). The motion intended that the exclusively Class A IFQ allocation be limited to the amount of IFQ “controlled” by the IPQ holder, with the remainder allocated as Class A and Class B IFQ. Eligibility to receive an allocation of Class B IFQ in the Council motion relies on whether the processor “controls” delivery of the IFQ. Use of a “control” standard for determining whether Class B IFQ will be allocated has two effects: First, if the processor holds a limited amount of

IPQ, the Class A IFQ only allocation should be limited to an amount of IFQ that offset the IPQ holding, with the remainder of the allocation subject to the Class A/Class B IFQ split. Using this approach, a person receives a Class A only IFQ allocation for only those IFQ that are controlled by the processor, with the remainder of the allocation (which is beyond the control of the processor) as a Class A/Class B allocation. Second, if the processor does not control deliveries (regardless of the number of IPQ held), the Class B IFQ allocation will be necessary for negotiating strength of the person controlling deliveries in their negotiations with processors generally. If a “control” affidavit is used for determining who will receive Class B IFQ, the term “control” must be well-defined, so that the signatory to the affidavit knows what the attestation means.

Allocation of “only Class A IFQ” should be limited to the amount of controlled IFQ. The remainder of the allocation should be subject to the Class A/Class B division of fully independent harvesters. Additionally, the definition of control should be revised to reflect the nature of control at issue (

i.e.

, does the IPQ holder control the delivery of the IFQ). This definition may rely to some extent on “affiliation,” but control of deliveries should be paramount.

Response:

Amendment 18 provides that:

(1) Crab harvester QS held by IPQ processors and persons affiliated with IPQ processors will only generate Class A annual IFQ, so long as such QS is held by the IPQ processor or processor affiliate.

(2) IPQ processors and affiliates will receive Class A IFQ at the full poundage appropriate to their harvesters QS percentage.

(3) Independent (non-affiliated) harvesters will receive Class B IFQ pro rata, such that the full Class B QS percentage is allocated to them in the aggregate.

(4) “Affiliation” will be determined based on an annual affidavit submitted by each QS holder. A person will be considered to be affiliated, if an IFQ processor controls delivery of a QS holder's IFQ.

The commenter raises two separate points in this comment: (1) What is control for purposes of determining the amount of Class A IFQ that is to be issued to a person holding QS that is an IPQ processor or affiliate; and (2) how much Class A IFQ should be allocated to an IPQ processor or affiliate? Both of these questions must be answered to address the commenter's question.

(1) What Is Control?

The proposed rule measured control by requiring that each year in the Annual Application for Crab IFQ/IPQ the applicant provide documentation of affiliation declaring any and all affiliations using affiliation as defined in § 680.2 (See § 680.4(f)). Affiliation for purposes of determining a linkage with a PQS or IPQ holder is defined as: (1) Common ownership, either directly or indirectly by the PQS or IPQ holder of more than 10 percent of the QS or IFQ holding entity; (2) control of a 10 percent or greater interest by a PQS or IPQ holding entity in a QS or IFQ holding entity by controlling ownership or voting stock; and (3) a PQS or IPQ holder otherwise controlling a QS or IFQ holding entity through any other means whatsoever. This definition of affiliation is intended to broadly include activities that would allow a PQS or IPQ holding entity to exercise control over the activities of a QS or IFQ holder—specifically, the control of where the IFQ crab would be delivered. The definition of “otherwise controls” in the affiliation definition is intended to be broad and would encompass a range of arrangements either contractual or otherwise that could be used to express control. The current definition of affiliation does not define specific indices of control such as are provided in the AFA (

See

§ 679.2 for the definition of affiliation under the AFA) or under regulations that govern the control of a fishing vessel by a non-U.S. citizen as defined under Maritime Administration (MARAD) regulations (

See

46 CFR 356.11), although those indices of “control” would be subsumed under the broad definition of “otherwise controls” in the affiliation definition contained in the proposed rule.

Amendment 18 does not expressly define the method for establishing how control is to be measured, what indices should be used, and whether additional factors such as ownership of the IFQ holding entity could be used to define control. NMFS has decided that because control is not specifically defined in Amendment 18 and because control can be expressed in a variety of ways, that the affidavit that is submitted each year should include a definition of control of delivery that includes the ability of the IPQ holder to direct the delivery of the IFQ using measures of ownership and otherwise controlling the operations of the IFQ holder. These two aspects of “control” are necessary to ensure that IFQ that is held by an IPQ holder or an affiliate is apportioned the appropriate amount of Class A IFQ. Ownership is frequently used as one index of control in measuring the ability of a person to exercise control over a corporation. Owning a corporation effectively determines the course of the activities of that corporation. The amount of ownership that results in an ability for the IPQ holder to direct the business operations (

i.e.,

where the IFQ crab are delivered) is subject to some debate and business arrangements.

The EIS prepared for the final rule does not provide a specific example of how a PQS or IPQ holder may control the deliveries of an IFQ holder. Section 2.2 of the EIS notes that: only QS holders that are unaffiliated with holders of processing shares would receive Class B IFQs. Holders of processing shares and their affiliates that hold QS would be allocated Class A IFQs for all of their IPQ holdings, with the remainder of their IFQ allocated as Class A IFQ and Class B IFQ at the same ratio as those allocated to independent harvesters. The annual poundage allocation of IFQ arising from the QS would be unaffected by the Class A/Class B IFQ distinctions. For each region of each fishery, the allocation of Class B IFQ would be 10 percent of the total allocation of IFQ. The absence of an affiliation with a holder of processing shares would be established by a harvester filing an annual affidavit stating that the use of any IFQ held by that harvester is not subject to any control of any holder of processing shares.

While this description provides some detail about the actual allocation of the Class A and Class B IFQ, and that affiliation with a processor would be established by an annual affidavit, the indices for control are not defined.

The proposed rule used a 10 percent ownership control standard as a means of measuring the control over an entity based on several factors: (1) The use of a 10 percent standard in several other aspects of Amendments 18; and (2) the standard used under the AFA which is a rationalization program that uses an affiliation definition for purposes of applying use caps and processing sideboard limitations.

Use of the 10 Percent Standard in Amendment 18.

There are several sections throughout Amendment 18 where a 10 percent common ownership standard is used for purposes of determining whether or not a linkage occurs. While these standards do not

per se

state that a 10 percent common ownership standard is applicable to establish control, the consistent use of a 10 percent common ownership standard in various aspects of this program suggests that a 10 percent standard was perceived to be a threshold level at

which some form of control is being exercised by one entity over another entity. The principal use of the 10 percent standard is found in the following sections of Amendment 18:

(1) 1.6.2 Leasing of QS (leasing is equivalent to the sale of IFQs without the accompanying QS.). Leasing is defined as the use of IFQ on vessel which a QS owner holds less than 10 percent ownership of vessel or on a vessel on which the owner of the underlying QS is not present

(2) 1.6.4 Controls on vertical integration (ownership of harvester QS by processors): Option 3: Vertical integration ownership caps on processors shall be implemented using both the individual and collective rule using 10 percent minimum ownership standards for inclusion in calculating the cap. PQS ownership caps are at the company level.

(3) 2.7.1 Ownership caps. PQS ownership caps should be applied using the individual and collective rule using 10 percent minimum ownership standards for inclusion in calculating the cap. PQS ownership caps are at the company level.

(4)

Cooperative Section Rules governing cooperatives.

The Council clarified the following rules for governing cooperatives: Four entities are required for a cooperative. The requirement for four owners to create a cooperative would require four unique entities to form a cooperative. Independent entities must be less than 10 percent common ownership without common control (similar to the AFA common ownership standard used to implement ownership caps).

The RIR/IRFA prepared for this action also used a 10 percent ownership standard for purposes of measuring whether a common linkage exists between a processor and a harvester and whether a vessel was considered to be affiliated with a processor. (

See

3.7.9.4 Shares of processor affiliates, and page 293 of Appendix 1). As is noted in the RIR/IRFA “[t]his level of ownership and the ownership of affiliates is intended to capture all relationships and influences and was used for determining ownership under the AFA (

See

page 191 of Appendix 1).” The RIR/IRFA analyzed the potential economic impacts of affiliation using this standard and the potential impacts on affiliated IFQ holders was detailed for each of the crab QS fisheries.

While alternative ownership standards could be chosen, NMFS is relying on the frequent and consistent use of a 10 percent standard throughout Amendments 18 and 19 and the EIS/RIR/IRFA prepared to support this action as the basis for establishing affiliation, and therefore control, as being triggered when one entity holds a 10 percent or great common ownership interest in another entity.

Other Indices of Control.

Amendment 18 indicated that control would be expressed “if an IPQ processor controls delivery of a QS holder's IFQ.” Amendment 18 does not provide additional guidance on how that control may be expressed. The preamble to the proposed rule provides examples of control based on the definition of affiliation. “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.” The definition used in the proposed rule is broad, but may not provide an adequate definition for purposes of the affidavit that is required on an annual basis.

NMFS agrees that the definition of “otherwise controls” could be clarified by using specific indices in the final rule. NMFS is expanding the definition of “otherwise controls” using the indices that are used for determining impermissible control by a non-citizen of a United States fishing vessel under MARAD regulations at (46 CFR 356.11) as a guide for these specific indices. Those indices are detailed in the final rule and include those situation in which a PQS or IPQ holder has:

(1) The right to direct, or does direct, the business of the entity which holds the QS or IFQ;

(2) The right in the ordinary course of business to limit the actions of or replace, or does limit or replace, the chief executive officer, a majority of the board of directors, any general partner or any person serving in a management capacity of the entity which holds the QS or IFQ;

(3) The right to direct, or does direct, the transfer of QS or IFQ;

(4) The right to restrict, or does restrict, the day-to-day business activities and management policies of the entity holding the QS or IFQ through loan covenants;

(5) The right to derive, or does derive, either directly, or through a minority shareholder or partner, and in favor of a PQS or IPQ holder, a significantly disproportionate amount of the economic benefit from the holding of QS or IFQ;

(6) The right to control, or does control, the management of or to be a controlling factor in the entity holding QS or IFQ;

(7) The right to cause, or does cause, the sale of QS or IFQ;

(8) Absorbs all of the costs and normal business risks associated with ownership and operation of the entity holding QS or IFQ;

(9) Has the ability through any other means whatsoever to control the entity that holds QS or IFQ.

Other factors that may be indica of control include, but are not limited to, the following:

(1) If a PQS or IPQ holder or employee takes the leading role in establishing an entity that will hold QS or IFQ;

(2) If a PQS or IPQ holder has the right to preclude the holder of QS or IFQ from engaging in other business activities;

(3) If a PQS or IPQ holder and QS or IFQ holder use the same law firm, accounting firm, etc.;

(4) If a PQS or IPQ holder and QS or IFQ holder share the same office space, phones, administrative support, etc.;

(5) If a PQS or IPQ holder absorbs considerable costs and normal business risks associated with ownership and operation of the QS or IFQ holdings;

(6) If a PQS or IPQ holder provides the start up capital for the QS or IFQ holder on less than an arm's-length basis;

(7) If a PQS or IPQ holder has the general right to inspect the books and records of the QS or IFQ holder;

(8) If the PQS or IPQ holder and QS or IFQ holder use the same insurance agent, law firm, accounting firm, or broker of any PQS or IPQ holder with whom the QS or IFQ holder has entered into a mortgage, long-term or exclusive sales or marketing agreement, unsecured loan agreement, or management agreement.

(2) How Much Class A IFQ Should Be Allocated to an IPQ Processor or Affiliate?

The second main issue raised by the commenter is how much Class A IFQ is issued to QS or IFQ holders who are affiliated with PQS or IPQ holders. Amendment 18 appears to be somewhat internally inconsistent. It states that “Crab harvester QS held by IPQ processors and persons affiliated with IPQ processors will only generate Class A annual IFQ, so long as such QS is held by the IPQ processor or processor affiliate.” However, the next sentence apparently modifies this statement by noting that “IPQ processors and affiliates will receive Class A IFQ at the full poundage appropriate to their

harvesters QS percentage.” Section 2.2 of the EIS further supports an approach in which the amount of Class A IFQ that is issued to an IFQ holder or affiliate is based on the proportion of QS held to the amount of PQS held by the PQS holder to which the QS holder is affiliated.

NMFS is interpreting Amendment 18 in the following manner:

(1) If a person holds IPQ and IFQ, than that person will be issued Class A IFQ only for the amount of IFQ equal to the amount of IPQ held by that person. Any remaining IFQ would be issued as Class A and Class B IFQ in a ratio so that the total Class A and Class B IFQ issued in that fishery is issued as 90 percent Class A IFQ and 10 percent Class B IFQ.

As an example, if a person held 100,000 pounds of IPQ in a fishery and 120,000 pounds of IFQ, that person would receive 100,000 pounds of Class A IFQ and 20,000 pounds of IFQ issued in the appropriate Class A and Class B ratio for that person;

(2) If a person holds IPQ in excess of the amount of IFQ held by that person, all IFQ holders affiliated with that IPQ holder will receive only Class A IFQ in proportion to the amount of IFQ held by that person relative to that amount of IPQ held by the IPQ holder to which they are affiliated. Any remaining IFQ would be issued as Class A and Class B IFQ in a ratio so that the total Class A and Class B IFQ issued in that fishery is issued as 90 percent Class A IFQ and 10 percent Class B IFQ.

For example, assume that an IPQ holder holds 200,000 pounds of IPQ and 100,000 pounds of IFQ in a fishery. Also assume that the IPQ holder is affiliated, either through a 10 percent common ownership standard, or through control, with 3 IFQ holders (IFQ holder A, IFQ holder B, and IFQ holder C). IFQ holder A has 100,000 pounds of IFQ, IFQ holder B has 25,000 pounds of IFQ, and IFQ holder C has 175,000 pounds of IFQ. Collectively, the three affiliated IFQ holders have 300,000 pounds of IFQ.

The IPQ holder would be issued all 100,000 pounds of his IFQ holdings as Class A IFQ because the amount of IPQ held (200,000 pounds) exceeds the total amount of IFQ that he holds. The remaining 100,000 pounds of Class A only IFQ would be allocated on a pro rata basis as follows.

(1) The total remaining IPQ (100,000 pounds) is divided by the total IFQ held by all affiliates of the IPQ holder (300,000 pounds). This yields a Class A only ratio of .333.

(2) The IFQ held by each affiliate is multiplied by the Class A only ratio. In our example:

IFQ holder A = 100,000 pounds × (0.333) = 33,333 pounds of Class A only IFQ

IFQ holder B = 25,000 pounds × (0.333) = 8,333 pounds of Class A only IFQ

IFQ holder C = 175,000 pounds × (0.333) = 58,333 pounds of Class A only IFQ.

Any remaining IFQ held by these IFQ holders would be allocated using the Class A and Class B ratio. This example is limited to IFQ holders being affiliated with only one IPQ holder. In cases where an IFQ holder is affiliated with multiple IPQ holders with IPQ in excess of their IFQ holding , this same methodology would apply. This method meets the intent of Amendment 18, and is consistent with the statements in the EIS concerning the allocation of Class A and Class B IFQ among persons affiliated with IPQ holders.

Comment 26:

The proposed rule at § 680.40(h)(4) contradicts Amendment 18 and Congressional mandate in applying the affiliation definition of 10 percent or more processor ownership for the allocation of Class B IFQ. This provision would cause severe economic harm to vessels that have affiliation by processors, stifle investment by QS holders in processing activity, and cause a number of serious problems for the development of a successful crab rationalization program. The final rule should define who can receive Class B IFQ as follows: Class B IFQ will be assigned to all eligible recipients except that Class B IFQ will not be assigned to any person whose delivery of crab is controlled by a holder of PQS or IPQ. Control will be determined based on an annual affidavit by each QS holder submitted as part of the annual application for crab IFQ/IPQ permit. A PQS or IPQ holder does not control QS or IFQ if the skipper responsible for delivery of crab harvested under the QS is contractually able to deliver its harvest wherever they choose without direction by the PQS or IPQ holder.

Response:

The response to this comment is addressed in the response to comment 25.

Comment 27:

The proposed rule at § 680.40(h)(4)(ii) would prohibit issuance of Class B IFQ to holders of PQS or IPQ or to entities affiliated with such holders. An affidavit requirement is set forth in the proposed rule as a criterion for the issuance of Class B IFQ, as specified in the Council motion and is an important element of accountability and enforceability of the system devised by the Council, and should be preserved. The final regulations should provide for an affidavit process for accountability and enforceability of a system devised by the Council for the issuance of B IFQ. Additionally, processor controlled IFQ holders should not be issued Class B IFQ.

Response:

The response to this comment is addressed in the response to comment 25. The affidavit is maintained as the standard by which NMFS will determine affiliation with a processor. The Annual Application for IFQ or IPQ will note what standards meet affiliation thresholds. The accountability for accurately supplying this information to NMFS will rest with the applicant.

Comment 28:

The test for determining which harvesters are ineligible to receive Class B IFQ should be whether a PQS holder, by any means whatsoever, controls where the harvester's IFQ are delivered. With respect to this test, control should be evaluated on the basis of criteria similar to those employed by the Maritime Administration when evaluating compliance with the AFA citizenship requirements. By focusing on IPQ holder ownership or control of an IFQ holder to the exclusion of other factors, the use of the affiliation standard at § 680.2 leaves open the possibility that Class B IFQ could be controlled by PQS holders in a manner that contravenes the intent expressed in the Council motion.

In order to fully protect the independence of Class B IFQ, each affiliation evaluation should include consideration of indicia of IPQ holder control of an IFQ holder and over IFQ delivery. Accordingly, the definition of affiliation used at § 680.40(h)(4) should be expanded to include indica of direct or indirect control similar to those used for evaluating affiliation in the AFA context and control of U.S. flag fishing vessels (46 CFR 356.11). In each case, these regulations compel a thorough evaluation of both the ownership of an entity and other control factors that may permit a non-owner to none-the-less exercise control over that entity or its actions. An annual evaluation of this control should occur in conjunction with the IFQ application process, and subsequent to this application, applicants should be prohibited, without prior approval by NMFS, from entering into any relationship with a PQS holder or affiliate that modifies the indica of control already evaluated.

Response:

The response to this comment is addressed in the response to comment 25. The rule does not specify that IFQ recipients notify NMFS after the issuance of IFQ and IPQ that they have entered into a relationship with a

PQS or IPQ holder that would result in them becoming affiliated or otherwise resulting in increasing control by the PQS or IPQ holder. NMFS did not make this a requirement for several reasons:

(1) NMFS would not be able to reissue Class A or Class B IFQ once the season has begun. Because the amount of IPQ issued in a fishery is equal to the amount of Class A IFQ, modifying the amount of Class A IFQ issued to a person due to a mid-season change in affiliation would require reissuing IPQ as well and would significantly disturb the operation of the fishery;

(2) In some cases an IFQ holder would not be aware of changes in corporate ownership that could increase the degree of control being exerted by an IPQ or PQS holder. As an example, IFQ could be held by a corporation that is in turn owned by several other corporations. If one of those corporations purchased IPQ, the IFQ holding corporation may not be aware of this change in affiliation unless private contracts stipulated that the IFQ holder be notified that such a purchase had occurred. In any case, the IFQ holder would not be able to exercise control over the actions of this party purchasing the IFQ.

The Annual Application for IFQ or IPQ requires each applicant to annually submit their affidavit and provides a reasonable assurance that if affiliation were to change in mid-season, those changes would be reflected in the affidavit for the following year. NMFS established a time period shortly after the annual application is due until IFQ and IPQ is issued where no transfers of IFQ or IPQ would be approved. This will provide NMFS with time to determine affiliations, the amount of Class A IFQ and Class B IFQ to be issued to each IFQ holder, and issue that IFQ and IPQ. Once issued, transfers could occur that could result in Class B IFQ being transferred to IPQ holders or their affiliates. Because we are modifying the way in which Class A IFQ and Class B IFQ is allocated to PQS or IPQ holders and their affiliates, this would be permitted.

Comment 29:

An extremely unreasonable burden would be put on harvesters if processors affiliated harvesters were interpreted to include harvesters who have a gear loan from a processor, a tender contract, or some other unforseen link with a processor that would happen with normal business dealings. Ths could prohibit the harvester from receiving Class B IFQ, participating in arbitration, or joining a cooperative. The solution of signing a control affidavit stating that a processor has no control of landings seems unclear. The final rule should carefully define control and affiliation so as to avoid creating a disadvantage to harvesters or creating a risk of having to sign an affidavit that could later be interpreted as fraudulent.

Response:

The response to this comment is addressed in the response to comment 25.

Comment 30:

I am a fisherman with a partnership to two different crab vessels that will be participating in the upcoming crab rationalization. On one of these vessels I have been a partner for seventeen years with a group that also owns a small part of a processor. We have a co-ownership agreement that gives me complete control of when and where the vessel delivers. In the last seventeen years I have delivered many times to processors not owned by my partners, the choice has always been mine, as stated in our co-ownership agreement. To deny me Class B IFQ shares under § 680.40(h)(4) gives an unfair advantage to the other unaffiliated vessels who may be able to receive a premium for this crab from outside (non-PQS) buyers. I believe if a vessel could make an annual declaration of control, that any concerns of anti-trust violations could be alleviated, especially with a co-ownership agreement showing the “affiliated” partner not in control of decision making for the vessel or its QS/IFQ.

Response:

The response to this comment is addressed in the response to comment 25.

Comment 31:

The allocation of only Class A IFQ to those vessels that are considered affiliated at § 680.40(h)(4) will disadvantage those minority co-owners that have complete operational control over the deliveries of the vessel and IFQ. The definition of control should be revised to reflect the nature of control at issue, taking into account past operating practices. For instance, a vessels may have partial or full ownership by an entity that also has partial ownership in a processing operation. While these vessels might be considered “affiliated” with a processor, they have historically acted independent of the processor and will continue to do so. The operator and in some cases the co-owners of the vessel and have full freedom to deliver wherever they wish, even to the point that a large portion of their QS will be in the Northern Region that their affiliated processor has never had operations. An annual declaration of control is a reasonable method for determining who will receive Class B IFQ.

Response:

The response to this comment is addressed in the response to comment 25.

Comment 32:

I have had a business relationship with a processing company for 16 years. I have been a partner in the vessel for 12 years. They have never told me where to deliver my catch. I do not fish for their processing company and have not for 14 yrs. I have delivered to a different processor mainly for the last 14 years. My partner's attitude has always been its my choice where to deliver my product. I think I have earned my Class B IFQ and deserve them. I think a simple letter stating that I control where I will deliver my product will be sufficient.

Response:

The response to this comment is addressed in the response to comment 25. The factors that this commenter raises would be supplied in the affidavit that he submits each year. If there are sufficient indicia to indicate that control exists, then that person would need to indicate that they are affiliated with an IPQ holder. If not, or if it is unclear, NMFS may request additional information.

Comment 33:

Comment strongly supports the dual definition of control (by any means) and the 10 percent affiliation standard identified by NMFS in the proposed rule. The Program was developed with PQS included, which is a new concept in fisheries management. Due to the uncertainties in how this will work, the Council stipulated that only those non-affiliated QS holders would receive the IFQ in an Class A/B IFQ split. This is to benefit the independent QS holders and help to maintain a competitive market place. The concept of a simple affidavit stating that control over deliveries is insufficient. Anyone can say that they are not under the control of a processor. The added 10 percent ownership requirement, which is consistent with other definitions of affiliation by the Council and NMFS throughout the motion and the EIS, is appropriate and needed.

Response:

The response to this comment is addressed in the response to comment 25.

Comment 34:

Nowhere in the Council motion are recipients of Class B IFQ restricted in nearly so severe a manner as in the proposed rule at § 680.40(h)(4)(ii). The Council motion clearly states that if the QS holder is appropriately able to execute an affidavit stating that no IPQ holder controls where the IFQ is delivered, that QS holder is entitled to receive Class B IFQ. If a QS holder executed such a document, and was discovered to have misrepresented the facts, then that QS holder would be liable for fraud under

federal law. By drawing the proposed rule so narrowly, NMFS has created new restrictions to prevent abuse, restrictions which were neither seen to be necessary by the Council nor which acknowledge the very real penalties which already exist under federal laws for fraud. NMFS should redraft the regulations to accurately reflect the Council motion, bearing in mind that industry participants are already appropriately held to the standard of making accurate representations to NMFS.

Response:

The response to this comment is addressed in the response to comment 25.

Comment 35:

In order to fully protect the independence of Class B IFQ harvesters, each affiliation evaluation should include consideration of a broad range of indicia of “affiliation/control”, as well as “affiliation/ownership”. “Affiliation/control” and “affiliation/ownership” are two separate tests, both of which must be satisfied in order to be eligible for Class B IFQ. These separate tests are spelled out in the April 2003 Council motion on “Processor Holdings of Harvest Shares” It is crystal clear from the motion that the truly “independent (non-affiliated) harvesters” are to be the recipients of the full allocation of aggregate Class B IFQ. These are all or nothing tests, without any “proportionality” component relative to how much PQ is held, nor the degree of affiliation as a function of degree of processor ownership of the harvester QS holder.

Though the words of the April motion do not indicate a specific 10 percent ownership standard for defining “affiliation,” 10 percent was the standard that was used in the RIR analysis that was before the Council when it made the motion.

Some have argued that discussion in section 1.6.4, of the EIS pg. 2-41 suggests proportionality in distributing Class B IFQ to non-fully independent harvesters. However, the EIS was not available to Congress when it acted to require implementation of the program as “approved by the North Pacific Fishery Management Council between June 2002 and April 2003, and all trailing amendments including those reported to Congress on May 6, 2003.” Thus the ‘legislative’ history on how to allocate Class B IFQ to independent harvests should rest not on section 1.6.4 of the EIS which was not available, but on the RIR which was available in June 2002 and when the Council motion was made in April 2003, and which consistently used a 10 percent affiliation standard to define “independence” as well as incorporating a separate test for “control.”

Response:

The response to this comment is addressed in the response to comment 25.

Comment 36:

The Council motion included a trigger mechanism for red king crab and snow crab that would end the Class A/B IFQ designations for harvesting QS. If the red king crab GHL exceeds 20 million pounds and/or the snow crab GHL exceeds 175 million pounds, all harvesting shares above those trigger amounts are to be unrestricted or Class B IFQ. If the proposed rule's definition of affiliation remains in place, what shares will affiliated vessels receive when the trigger numbers are reached? Under the proposed rule they cannot receive Class B or unrestricted IFQ. This outcome, while not yet realized in terms of demonstrated GHL, highlights the inconsistency between the proposed regulation and the intent of the Council. Again, the prohibition to receive Class B IFQ to anyone with a 10 percent ownership standard has far reaching consequences. If the regulation remains unchanged, no holder of QS will dare to invest in processing because he will forfeit his ability to receive Class B IFQ. CDQ groups wishing to increase their participation in crab processing and harvesting will not be able to do so. The vessels whose delivery are uncontrolled but have a greater than 10 percent ownership share held by a PQS holder are also penalized. The regulations should be amended to follow the Council intent to utilize the affidavit process to determine control over delivery as the basis for allocating Class A and B IFQ.

Response:

Portions of this comment are addressed in the response to comment 25. For the allocation of IFQ when the TAC for Bristol Bay red king crab or snow crab exceeds the specified amount, the final rule specifies at § 680.4(j)(3) that the allocations are made as a modified form of Class A IFQ that would not be subject to delivery to an IPQ holder, but which still have regional designation requirements as provided in Amendment 18. This differs from Class B IFQ, which are not subject to regional delivery requirements

Comment 37:

Class B IFQ should not be held by processor-affiliated entities. The important point here, as in the case of cooperatives, is to achieve, through a definition of “affiliation,” a result that is consistent with objectives of the both rationalization program and the antitrust laws. Class B IFQ provide leverage for harvesters, who must bargain in a system which provides 90 percent of IFQ shares are Class A IFQ that must be matched to IPQ. This intended leverage on the part of harvesters is compromised, if processor-controlled entities hold Class B IFQ. However, where a harvester is not controlled by a processor, then the rationale for holding Class B IFQ properly applies. The commenter believes that skippers and crew members of vessels in which there is some, but not controlling, processor interest, should enjoy the intended benefit of Class B IFQ.

Response:

The response to this comment is addressed in the response to comment 25.

Comment 38:

The test for determining which harvesters are ineligible to receive Class B IFQ should be whether a PQS holder, by any means whatsoever, controls where the harvester's IFQ are delivered. With respect to this test, control should be evaluated on the basis of criteria similar to those employed by the MARAD when evaluating compliance with the AFA citizenship requirements. By focusing on IPQ holder ownership or control of an IFQ holder to the exclusion of other factors, the use of the affiliation standard at § 680.2 leaves open the possibility that Class B IFQ could be controlled by PQS holders in a manner that contravenes the intent expressed in the Council motion.

In order to fully protect the independence of Class B IFQ, each affiliation evaluation should include consideration of indicia of IPQ holder control of an IFQ holder and over IFQ delivery. Accordingly, the definition of affiliation used at § 680.40(h)(4) should be expanded to include indica of direct or indirect control similar to those used for evaluating affiliation in the AFA context and control of U.S. flag fishing vessels (46 CFR 356.11). In each case, these regulations compel a thorough evaluation of both the ownership of an entity and other control factors that may permit a non-owner to none-the-less exercise control over that entity or its actions. An annual evaluation of this control should occur in conjunction with the IFQ application process, and subsequent to this application, applicants should be prohibited, without prior approval by NMFS, from entering into any relationship with a PQS holder or affiliate that modifies the indica of control already evaluated.

Response:

The response to this comment is addressed in the response to comment 25.

Comment 39:

While the affidavit process does go a long way towards defining processor affiliates, an ownership standard is also necessary, such as the MARAD's definition of the

25 percent rule for foreign ownership of U.S. flagged vessels. This standard should be adopted in both the issuance of Class B IFQ and binding arbitration standards.

Response:

The response to this comment is addressed in the response to comment 25. The 10 percent standard for ownership was chosen based on the preponderance of its use in Amendment 18 as a means of establishing linkages among various entities for a variety of applications. This same 10 percent standard was used for analysis in the EIS/RIR/IRFA supporting this action.

Comment 40:

The proposed rule at § 680.42(b)(1)(i) could limit the benefits from the LLP license buyback to persons that purchased LLP licenses after June 10, 2002, that were put over the use caps by the buyback. Include a provision that would grandfather any initial allocation in excess of the use caps received from LLP licenses acquired after June 10, 2002, and prior to the referendum on the buyback, to the extent that the allocation would not have been in excess of the cap, but for the buyback.

Response:

The comment applies to the final rule at § 680.42(a)(1)(i), which addressed PQS issuance. Neither the proposed rule nor Amendment 18 provided specific guidance on the potential implications of the BSAI Crab Fisheries Capacity Reduction Program, or the “Buyback” on persons who received catch history by transfer of an LLP license after June10, 2002, that may result in an increased chance of that person receiving an allocation of QS in excess of the use caps established at § 680.42(a). Amendment 18 notes that “a cutoff date of June 10, 2002, was established for the QS ownership cap grandfather provision.” Amendment 18 did not provide a specific exemption to this cut off date in the case of the Buyback being approved, although the Buyback was under development at the time that the Council took final action. Additionally, Congressional action on portions of the Buyback were approved prior to Congressional action on the Crab Rationalization Program.

However, the legislation that enacted the Buyback required that a referendum of eligible voters approve the program before it could be enacted. The final results from the referendum were provided on November 24, 2004. Prior to this time, it is reasonable to assume that an individual would not have known if the Buyback would have been approved, or if it would have an impact on the amount of QS a person would be issued based on LLP licenses transferred after June 10, 2002. This November 24, 2004, deadline is after the publication of the proposed rule implementing the Crab Rationalization Program and NMFS was unable to incorporate the potential effects of the Buyback in the proposed rule because it had not yet been approved by the fleet.

Due to the lack of clear guidance on this issue in Amendment 18, but the potentially adverse and unanticipated effect of the Buyback, NMFS may make specific exemptions to the cutoff date in Amendment 18 to accommodate transfers that occurred after June 10, 2002 but prior to the approval of the Buyback by referendum on November 24, 2004. NMFS has modified the final rule at § 680.42(a)(1)(ii)(B) so that any person who applies to receive QS based on an LLP license transferred after June 10, 2002, but prior to November 24, 2004, will receive the amount of QS associated with that transferred LLP license in excess of the use cap for that crab QS fishery if that transfer would not have resulted in that person exceeding the QS use cap for that fishery if the total fishery catch history had not been reduced by the Buyback Program.

Comment 41:

The proposed rule does not provide for a modification of the QS ownership caps as a result of recently approved crab vessel buyback. The purpose of the QS cap was to eliminate speculative purchases of QS above a certain level after the Council's motion passed in June of 2002. The buyback will have the impact of increasing QS holders' percentage ownership by about 10 percent. It was generally understood that the buyback would function so that the ownership cap would increase by the same percentage as the increase resulting from the implementation of the buyback and the final rule should reflect this understanding. If not, those who owned QS at the capped level would not be able to receive the benefits of the buyback program.

The buyback was a legal action that took place after the Council's June 2002 motion. The agency does have authority to implement regulations consistent with the Council's intent. In this case, no individual speculated on the purchase of QS that would put them over the cap. Instead, an industry approved buyback program resulted in every participant that remained in the fishery receiving a greater harvest share. It is in full compliance with the Council's intent that the QS cap be raised accordingly.

Response.

This response is addressed in the response to comment 40.

Comment 42:

The provisions § 680.40(b)(4)(ii)(B) and (E) of the proposed rule prevent the separation of an LLP license from its history. The provision should allow separation in the case of a person acquiring an LLP license to remain in a fishery (§ 680.40 (c)(1)(vii)). Insert a provision that permits the separation of an LLP license from its history to the extent necessary to achieve the purpose of § 680.40 (c)(1)(vii) of the proposed rule.

Response:

The commenter is referring to § 680.40(c)(2)(vii) in the final rule. This provision was intended to address the limited circumstance where a person transferred an LLP license for use on a vessel which otherwise would have been qualified to participate in the fishery. NMFS composed the proposed rule to limit this provision rather narrowly. Amendment 18 notes that “the underlying principle of this program is one history per vessel.” The specific provision at § 680.40(c)(2)(vii) is intended as a general exemption to this rule. NMFS modified § 680.40(b)(4)(ii)(B) and (E) in the final rule to note that this general principle is not applied for purposes of complying with § 680.40(c)(2)(vii).

Comment 43:

The provision at § 680.40(c)(1)(vii) permits a person that purchased an LLP license to remain in a fishery to use the history of the vessel on which the LLP license was used or on which the LLP license was based. The requirement that the vessel using the LLP license have an interim LLP license could limit the application of this provision to situations where multiple license transfers were required to comply with vessel length limits on LLP licenses. Remove the limitation that the LLP license be an “interim” license. The rule should be clear that no history may be credited toward two different allocations and that only one history may be credited to an LLP license.

Response:

Amendment 18 does not explicitly limit the application of this exemption to persons with an interim LLP license. NMFS had established this limitation in the proposed rule to tightly constrain the applicability of this provision to the general rule that there should be only one catch history eligible to receive an allocation per vessel. NMFS has removed the exemption's limitation that the LLP license be an interim LLP license. Additionally, the provision at § 680.40(c)(2)(vii) clearly states that only one catch history may be credited to a person who applies to receive QS with a permanent, fully transferable LLP license. The catch history used by that QS applicant may be either that derived from that LLP license or the catch history from the vessel which that LLP was transferred and used, but not both.

Comment 44:

The January 1, 2002, cut-off date on the provision, in the

proposed rule at § 680.40(c)(2)(vii), that would allow a person who applies to receive QS with an LLP license endorsed for a fishery to 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 by another vessel, is arbitrary. The cut-off date is unlawful and penalizes LLP license holders who purchased licenses after that date to remain in the fishery by not allowing them to receive QS based on the more extensive catch history of another vessel. Section 680.40(c)(2)(vii) should be revised either to strike the January 1, 2002, date or to accommodate the circumstance of a prospective applicant whose interim LLP license was not invalidated, and who did not purchase a permanent LLP license, until after that date.

Response:

The January 1, 2002, cut-off date is a provision of Amendment 18. Amendment 18 was approved by the Council and codified by section 313(j) of the Magnuson-Stevens Act. NMFS does not possess the discretion to alter this provision as it exists in statute. Any change to this provision requires an amendment to the Program and should be addressed with the Council. Therefore, NMFS will not make this change in the final rule. The Council did establish a clear control date prior to final decision on this Program to prevent speculative behavior by interim LLP license holders or those without an LLP license to avoid redistributing QS allocations to those who did not have a permanent LLP license.

Comment 45:

Clarification of Council intent is necessary to determine whether the Council meant to apply the January 1, 2002, cut-off date to the provision that would allow a person who applies to receive QS with an LLP license endorsed for a fishery to 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 by another vessel. Thus, there appears to be considerable uncertainty concerning how these exceptions to the general rule are intended to operate.

Response:

NMFS disagrees that clarification of Council intent is necessary. Amendment 18 explicitly applies the January 1, 2002, date to this provision. Therefore, no uncertainty exists concerning implementation of these exceptions to the basis for QS distribution.

Comment 46:

The proposed rule is arbitrary and capricious, does not constitute reasoned decision-making, and is not consistent with standards for agency action set forth in the APA and judicial decisions applying those standards. There is simply no rational connection between the cut-off date and the invalidation/purchase criterion underlying the exemption, and no explanation was given for denying an allocation of QS to persons whose interim LLP licenses were invalidated by NMFS, and who thus did not purchase a permanent LLP license until after January 1, 2002. The Council selected the January 1, 2002, cut-off date in substantial part to accommodate the circumstances of a particular individual, and did not consider the situation of other interim LLP license holders. The Council entirely failed to consider that claims for LLP licenses were still pending before NMFS as of January 1, 2002, and that interim LLP licenses of some participants would not be invalidated until after that date. Further, the cut-off date was selected retroactively, and did not give interim LLP license holders any notice that their ability to continue participating in the fishery would hinge on purchasing a permanent LLP license by a date certain.

Response:

This comment has been addressed in a previous response to comment 44.

Comment 47:

The January 1, 2002, cut-off date is inconsistent with the National Standards for implementing the Magnuson-Stevens Act, in particular, National Standard 4. The cut-off date unfairly and inequitably denies an allocation of CVO QS to applicants for whom the invalidation/purchase trigger of the exemption did not occur until after January 1, 2002. It penalizes an LLP license holder who exercised its rights under the LLP to appeal an initial administrative determination (IAD) by NMFS, but whose appeal was not resolved by NMFS until after January 1, 2002. A person who did not appeal an adverse IAD, or whose appeal was resolved by NMFS prior to January 1, 2002, may receive an allocation of CVO QS under the exemption, but a person whose appeal was not resolved until after that date may not. There is no rational basis for this distinction.

Response:

This comment has been addressed in response to comment 44. Additionally, the January 1, 2002 cut-off date is part of Amendment 18. Section 313(j) of the Magnuson-Stevens Act requires NMFS to implement the Program as specified in Amendment 18.

Comment 48:

Principles of equal protection and due process, as contained in the Fifth Amendment to the U.S. Constitution, are offended by a regulatory system that makes a distinction between similarly situated persons on the basis of a arbitrary cut-off date. Persons whose interim LLP licenses were invalidated after January 1, 2002, and who then purchased permanent licenses to insure that their vessels would remain authorized to participate in the fishery, are in the same position as persons for whom the invalidation/purchase trigger of the exemption occurred prior to that date. The timing of invalidation of an LLP license was governed by regulations implementing the LLP and largely under the control of NMFS. It simply is not fair to deny an allocation of CVO QS to a person based in the fortuitous timing of NMFS’ decision to invalidate an LLP license. A participant in the fishery should not be penalized or denied an allocation of QS because it exercised its rights under the LLP regulations to pursue a claim for an endorsement but NMFS did not resolve that claim until after January 1, 2002.

Response:

This comment has been addressed in response to comment 44.

Comment 49:

The proposed rule at § 680.40 contemplates an interim LLP license as a condition for a license history exemption contemplated by the Council. By requiring such a license and prohibiting the severability of catch history from an LLP license for initial allocation of QS, the proposed rule excludes a vessel for which there was no such license, but which otherwise would qualify for the exemption. The owners of two of the vessels in question were advised to obtain a complete LLP package or they would be denied a permanent LLP license. They did so, without first being so denied, and thus, were not issued an interim LLP License. The Council did not require an interim LLP License as a qualification for the history exemption, and it was not the intent of the Council to exclude the vessels in question. The final regulations should allow the history exemption for the very limited number of vessels in question. The commenter estimates no more than four LLP licenses will utilize this exemption.

Response:

This comment has been addressed in response to comments 42 and 43.

Comment 50:

The exception at § 680.40(b)(4)(vii) of the proposed rule permitting issuance of QS to persons who made landings under an interim LLP license by acquired a fully transferable LLP license to preserve their fishing eligibility prior to January 1, 2002, should be narrowly construed to permit the intended beneficiaries of that exception to take advantage of it, but not allow unintended beneficiaries to likewise benefit from the exemption. The commenter is opposed to any broader interpretation of this exemption than is necessary to give effect to the

Council's intent and therefore encourages NMFS to strictly construe the proposed exemption in accordance with the Council's motion.

Response:

NMFS has revised § 680.40(b)(4)(vii) in the final rule to limit the applicability of the provision while meeting the intent of Amendment 18. This includes not expanding the dates by which the transfer needed to occur, nor the limitation that only one catch history may be used for purposes of receiving QS.

Crew Sector

Comment 51:

The provision at § 680.40(b)(2)(i)(B)(

2

) suggests that regional designations apply to CVC QS “prior to July 1, 2008.” The provision should read, “on and after July 1, 2008.”

Response:

NMFS agrees and changed the language at § 680.40(b)(2)(i)(B)(

2

) to read, “on and after July 1, 2008.”

Comment 52:

The provisions in the proposed rule at § 680.40(h)(1) through (7) appear to make no IFQ allocations for CVC QS holders prior to July 1, 2008. The CVC IFQ should not be subject to region or processor landing restrictions during this time period. The provision should make clear that CVC QS holders receive an allocation prior to July 1, 2008.

Response:

NMFS agrees and has modified the provisions at § 680.40(h)(1) through (7) in the final rule to clarify how CVC IFQ allocations occur.

Comment 53:

The table at § 680.41(c)(1)(i) in the proposed rule is incorrect concerning CVC or CPC in lines (E) and (F). In line (E), the initial recipient of QS is not relevant (no provision authorizing recipients of an initial allocation to receive shares is included for the acquisition of CVC and CPC shares). The only standard for eligibility to receive CVC or CPC shares is that the person acquiring the shares must be an individual that is a U.S. citizen and an “active participant”. Similarly, in line (F), a cooperative cannot receive shares since it doesn't meet those criteria. The line concerning cooperative acquisition could be deleted. Alternatively, a cooperative could be permitted to receive shares through an individual that meets the requirements, if the agency would like to assume the added administrative burden of tracking those transactions and performance of owner on board requirements. Limit eligibility to receive CVC and CPC shares to individuals who are U.S. citizens and “active participants.”

Response:

NMFS agrees and has restructured the table at § 680.41(c)(1)(v) so that it is clear that a person who wishes to receive CVC or CPC QS or IFQ by transfer must be a U.S. citizen, have met sea time requirements, and be a recent participant in a crab fishery in the 365 days prior to applying for the transfer. The regulations at § 680.41(c)(1)(vi) have been modified so that CVC and CPC IFQ cannot be transferred to a cooperative because the regulations at § 680.42 have been modified so that owner onboard provisions would apply even if the CVC of CPC IFQ is being used in a crab harvesting cooperative. It should be noted that CVC and CPC IFQ may be used in a cooperative by a person who receives CVC or CPC IFQ by transfer and then converts that IFQ for use in the cooperative, provided that the owner on board provisions for use in a crab harvesting cooperative are met.

Comment 54:

The table at § 680.42(b)(2)(i) specifies the use caps for CVC and CPC shares. Under the Council motion, these caps are to be equivalent to the CVO and CPO vessel use caps. As written, they are equivalent to the individual CVO and CPO use caps (in most cases one-half of the correct cap). Revise individual use caps for CVC and CPC shares to equal the vessel use caps.

Response:

NMFS agrees, Section 1.8.1.9 of Amendment 18 notes that “C share ownership caps for each species are the same as the vessel use cap for each species.” The table at § 680.42(b)(2)(i) in the final rule has been modified to correctly reflect Amendment 18.

Comment 55:

An eligible captain, who intended to continue fishing but happened to die between seasons of causes unrelated to fishing, should qualify to receive CVC QS. The proposed rule is unclear whether this is the case. Is it the intent of Amendment 18 and the regulations to determine what kind of death will qualify?

Response:

This comment is applicable to regulations at § 680.40(b)(3)(C)(2) in the final rule. Amendment 18 notes that “[f]or captains who died from fishing related incidents, recency requirements shall be waived and the allocation shall be made to the estate of that captain.” Amendment 18 clearly establishes that the limits under which the recency requirements to receive CVC or CPC QS can be waived. NMFS has interpreted a “fishing related incident” as one in which the person died while serving as a member of a harvesting crew in any U.S. commercial fishery. Section 313(j) of the Magnuson-Stevens Act requires NMFS to implement the Program provisions as specified in Amendment 18. Any change to this provision requires an amendment to the Program and should be addressed with the Council. The rule has not been modified.

Comment 56:

The proposed rule contains many references to CVC (Catcher Vessel Crew) QS and CVS (Catcher Vessel Skipper) QS. Table 2, Eligibility to Receive Catcher Vessel Crew (CVC) Quota Share (QS) and Qualifying Year Periods, in the preamble to the proposed rule, lists 3 eligibility criteria, the second of which limits QS only to skippers. Since only 1 person on each vessel obtained an interim use permit in a given fishery, that person must be defined as the skipper. If the Council's intent was to award CVC QS to crew members, then it should add a phrase in eligibility requirement (2) that says, “* * * being the individual named on a State of Alaska Interim Use Permit [OR BEING AN INDIVIDUAL WHO DECLARED TAXABLE INCOME FOR FISHING VESSEL PROCEEDS BASED ON IRS FORM 1099 FOR CRAB AND] and who made at least one delivery. If the Council's intent was not to award any CVC QS to crew members, then it should clarify its intent by requesting the removal of all references to CVC QS from § 680, leaving only CVS (Catcher Vessel Skipper) QS.

Response:

The terms “C shares,” “Captain's shares,” and “Skipper shares” are used interchangeably in Amendment 18 to refer to QS and IFQ that would be allocated to non-LLP license holders—these terms are called CVC and CPC QS and IFQ by NMFS in the final rule. The preamble to the proposed rule (69 FR 63201) notes that “NMFS has determined that documentation necessary to allocate Crew QS, called C shares by the Council, would require that these shares be 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 phrase “crew” does not imply that persons other than those who made legal landings with an Interim Use Permit would qualify to receive CVC or CPC QS, and this is the skipper, or captain of the vessel in most cases. The rule has not been modified.

Comment 57:

Highline vessel owners expressed concern that awarding enough CVC QS to crew members to be consistent with crew share history could become too much overhead to vessel operators in the future. This is one likely reason that the Council specified that 3 percent of the QS be issued to skippers, rather than their historic share of about 15 percent. In order to accommodate CVC QS for crew as well

as skippers, without a large negative impact on skippers, it would be fairer to allocate an additional maximum 3 percent for crew member quotas (CVC QS) qualified by evidence from IRS form 1099. This is because the average crew share is about

1/3

of the average captain share, but there about 3 times as many crew as captains. The ratio of CVS QS to actual Skipper share for harvest years could be multiplied by the actual crew share to determine CVC QS.

Response:

Amendment 18 expressly limits the amount of QS that can be issued as CVC and CPC QS to 3 percent of the initial QS pool in a crab QS fishery. Issuing more than this amount would directly contradict Amendment 18. Section 313(j) of the Magnuson-Stevens Act requires NMFS to implement the Program provisions as specified in Amendment 18. Therefore, NMFS does not possess the discretion to alter the amount of QS that can be issued as CVC and CPC QS as it exists in statute. Any change to this provision requires an amendment to the Program and should be addressed with the Council. The rule has not been modified.

Comment 58:

Awarding crew QS only to interim use permit card holders is not fair to crew and captains who may have fished as many or more years but had only forms 1099 for evidence. It is also contrary to the stated intention that these shares are intended to provide long term benefits to captains and crew. Forms 1099 are verifiable evidence. To be consistent with the above intention, IRS Forms 1099 should be admitted as an alternative eligibility qualifier at § 680.40(b)(3)(iii). The following wording should be added: alternatively, crew may establish eligibility by submitting copies of IRS forms 1099 and/or crew settlement sheets for any 5 qualifying seasons. This is simple, fair, and consistent with the intention quoted above. It provides protection for crewmembers who may rely more heavily on crab in the recent years than in the earlier years. One good reason for the above intention is dependence on crab for livelihood of current crew.

Response:

This comment has been addressed in response to comment 56. The 1099 IRS form does not indicate that a person made legal landings in a crab QS fishery, only that a person earned income in a fishery. Such a form is not sufficient for determining whether legal landings have been made in the fishery.

Comment 59:

Collateral damage of the crab rationalization will hurt most for crewmembers who do not receive CVC QS, who also do not find a new job soon. It would be irresponsible for our industry to shift all of the cost of retraining, placement, and needs-based care onto the Department of Labor and the Department of Health and Social Services at the expense of the general taxpayer. Perhaps a portion of the Cost Recovery tax can be allocated towards reimbursing these agencies for costs of helping unemployed crewmembers.

Crewmembers have neither unemployment insurance nor a severance package. The federal government structured this crab plan in a manner that terminates about 1,000 crabbers or 80 percent of the industry's work force. They probably earned a modal value of $20,000-$30,000 per year crabbing. Most are desirable employees and will find work, but some may remain unemployed or underemployed for a long time. The taxpayers should not be saddled with having to bear the costs of maintaining the thousand crabbers about to be thrown out of work with neither severance pay nor unemployment. This burden on the taxpayers has not been evaluated, nor has the burden on the crew itself. It is as if a giant tax, amounting to a modal value of around $20-30,000 per year is taken out of the crewman's pocket and dropped into the pocket of the vessel owner. There should be a Federal acknowledgment of responsibility for those hurt most by the plan at the end of the section on Cost Recovery and Fee Collection.

Response:

The EIS/RIR/IRFA prepared to analyze the effect of Amendment 18 did examine the potential effects of this program on crew. This rule may result in fewer crew being employed as QS holders consolidate their fishing operations for improved economic efficiency—one of the primary goals of the Crab Rationalization Program. The Cost Recovery and Fee Collection portion of this Program is intended to offset the administrative costs and provide funds for loans to entry-level fishermen, including crewmembers who may not have received CVC or CPC QS.

Comment 60:

If the crab resource is to be fairly divided among the qualifying participants in the fishery, crew must be included. For the Council to neglect crew is irresponsible. For as long as crews have been crab fishing, a share of the crab resource has been allocated to each crewman. Crew's and owners' catch history are inextricably intertwined. Each vessel's crew and owners have signed a crew share agreement at the start of each fishery that defines the crew's share of the resource. The crew invested sweat equity in the operation by providing at least 10 days to 2 weeks of skilled services maintaining and improving vessels and gear before and after each fishery. As self-employed individuals, the crew paid their own taxes, expecting no fringe benefits normally associated with labor, such as owner contributions to health care plans, pensions, or workman's compensation. The crew suffered the physical brutality of the fishery and put their lives and health at risk whether or not the owner was on board. Without good crews and skippers, it was not possible to achieve a good catch history. Many vessel owners did not spend any time on the Bering Sea during the qualifying years. The crew was there, exposed to the elements. Vessel owners choosing to retire would benefit from a lower tax bill in the future, and the satisfaction of knowing that their net crew allocation provides a fair distribution.

Response:

The effects of this Program on crew members were considered during its development by the Council. Please see response to comment 59. The distribution of QS among the various participants in the crab fisheries was discussed and debated extensively during the Program's development. The rule has not been modified.

Comment 61:

While recognizing broad safety, conservation, and economic benefits of the rationalization program that is to be implemented by the present rulemaking, the commenter is concerned that many skippers and crew members in the BSAI crab fisheries will be confronted with severe financial dislocation. Adverse consequences will arise from fleet consolidation and coordination through IFQ transfers and fishing cooperatives, from overwhelming vessel owner control of IFQs, and from IPQs. Inevitably, there will be lost employment among skippers and crew members, as vessels are retired or otherwise idled by cooperative agreements. Furthermore, while those skippers and crew who remain in the fisheries will see increased harvests, they will also see the resulting benefits flow overwhelmingly to vessel owners and processors, not to mention those communities that will enjoy development quotas and other, similar advantages.

Response:

This response was addressed in the response to comment 59.

Comment 62:

There are measures that may be taken by rulemaking, consistent with the Program, the Magnuson-Stevens Act, other applicable law, that would provide some degree of protection and mitigation for skippers and crew members, so that they do not ultimately suffer the worst case. IPQs have a demonstrable potential for

adversely affecting skippers and crews (not to mention, independent vessel owners), and that this challenge should be addressed, as effectively as the law allows, in the present rulemaking. In short, the rulemaking should prevent processors from using the market power deriving from IPQs to achieve excessive leverage in price negotiations that affect not only vessel owners, but also skippers and crew members. Processors must not be provided an opportunity, by virtue of IPQs, to engage in the kinds of market-distorting practices proscribed by the antitrust laws. There are several, specific areas of concern in the proposed rule, with respect to the participation of processors: (1) Participation of processor-“affiliated” entities in cooperatives, (2) holding of Class B IFQ by processor-affiliated entities, and (3) participation of processors or their affiliated entities in binding arbitration.

Response:

The ability of IPQ holders and their affiliates to participate in crab harvesting cooperatives, hold Class B IFQ, and use the Arbitration System, has been addressed in previous response to comments under those subjects, particularly the response to comments 25 and 164. The final rule, Amendment 18, and the Magnuson-Stevens Act all prevent IPQ holders from using the market power deriving from IPQs to achieve excessive leverage in price negotiations and to engage in the kinds of market-distorting practices proscribed by the antitrust laws. Additionally, the economic data collection program was developed to allow such analysis in the future.

Comment 63:

Because of the adverse consequences to skippers and crew members, and because the rationalization program offers little of positive economic value to skippers and crew members, relative to vessel owners, processors, and communities, the proposed rule should, as a matter of principle, ensure that such value be maximized to the extent permitted by the Magnuson-Stevens Act and the Council-approved Program.

Response:

This Program was intended to provide additional economic benefits and efficiencies to a variety of participants. Achieving economic efficiency is one of several goals that this Program is mandated to meet under the Magnuson-Stevens Act.

Comment 64:

The Program has ignored the 1,500 to 2,000 crew members directly involved in the crab fisheries and has failed to include them in the decision-making. Many crew have been involved in crab fishing industry for their entire adult life. The crewmembers are directly responsible for the catch records on every one of the vessels. The Program will create a devastating effect on the livelihood of 50-60 percent of the fleet's crew. Under the Program, every boat will drop a crewmember. Owners with multiple boats will put the IFQ on select boats while their other boats pursue other options. Boats will be bought and sold for no other reason than to obtain their IFQ. What happens to the crewmembers of those vessels? Is it not the responsibility of government in a democratic society to make available programs so that the people they are putting out of work have the opportunity to seek gainful employment in other occupations? Economic stability/benefit is a good thing for everyone, however NMFS simply has not considered everyone involved. NMFS’ analysis regarding the effects of the Program on crew members is extremely poor.

NMFS has taken away our life, our livelihood, everything we depend on to live. We may not deserve much but we do deserve to be treated fairly by the Federal Government. Owners and processors get a percentage of IFQ for nothing, give us a percentage for nothing. Maybe buy us out so we can be retrained and enter another occupation.

Response:

In developing Amendment 18, the Council analyzed the potential effects of this Program on crew members and provided some allocation of QS to crew who have participated in the fishery. The distribution of the benefits from the program include a variety of industry participants. This Program was developed over a six year period by the Council which included input from crew and other industry participants. The effects of this Program on crew are discussed extensively in the EIS/RIR/IRFA supporting this action.

Comment 65:

It is important that the CVC and CPC QS ownership caps in the regulations be listed at the correct levels from Amendment 18, which are equal to the use caps for the vessels in all fisheries. For example, in the case of snow crab and Bristol Bay red king crab, vessel use caps are 2 percent and CVC and CPC QS ownership caps are also 2 percent.

Response:

NMFS agrees. This comment has been addressed in response to comment 54.

Comment 66:

The provision in the proposed rule at § 680.42(b)(1)(iii) creates ambiguity concerning non-individuals holding CVC IFQ and QS. CVC IFQ and QS may be held only by individuals. Limit CVC and CPC share holdings to individuals.

Response:

NMFS agrees, the language in the final rule at § 680.42(b)(1)(iii) has been clarified to note that CVC and CPC IFQ and QS may be held only by individuals who are qualified to do so. This change better reflects the provisions established in Amendment 18.

Processing Sector

Comment 67:

The proposed rule does not correctly implement the Council's intent for this fishery concerning the community of Adak. The clear intent of the Council was that 50 percent of the WAI golden king crab QS was to be processed in the WAI region. The problem has to do with some confusion in the Council's motion because harvesting history for WAI golden king crab does not match the processing history and does not match the recent golden king crab processing activities in Adak. The proposed rule does not meet the Council intent to process 50 percent of the IPQ in the WAI region. The fact that Adak is excluded from the ROFR provision suggests the Council felt ROFR was unnecessary because they were guaranteed 50 percent of the WAI golden king crab could be processed without IPQ. Another inconsistency is that Adak would be precluded from acquiring 50 percent of the IPQ by the 30 percent ownership cap. If inadequate IPQ is available for lease or purchase, the requirement to process 50 percent of the WAI golden king crab in the western region can only be achieved by allowing the crab to be processed without IPQ.

Response:

Persons who apply for PQS and receive PQS in excess of the use caps will be grandfathered in at that amount as long as that amount is not based on transfers of processing history after June 10, 2002. The rule has not been modified. Neither Amendment 18 nor the rule require that only one PQS or IPQ holder hold 50 percent of the PQS or IPQ in the Western Aleutian golden king crab fishery. The rule establishes that 50 percent of the total PQS and IPQ issued in this fishery must be processed West of a line at 174° W. longitude, as established in Amendment 18. The remaining PQS or IPQ does not have a regional designation and may be used West of 174° W. longitude as well. Nothing in this rule restricts the use of undesignated PQS or IPQ in Adak. In addition, at § 680.40, the final rule requires that 50 percent of the CVO and CVC QS in the Western Aleutian golden king crab fishery be designated for delivery West of a line at 174° W. longitude. This provision would not be implemented for CVC QS until July 1, 2008, as established under Amendment 18.

Comment 68:

The provision in the proposed rule at § 680.40(e)(1)(i) and

(e)(1)(ii)(D) refers to the Total Processing Denominator (TPD) for each year. When taken together with the reference to the “average percentage of the TPD for a person” at (e)(1)(ii)(D), the provisions suggest that the “average annual percentage” approach to determining allocations will be used for processors, which is not correct. Clarify method of allocation of processor individual allocations is total individual qualified history divided by all qualified history.

Response:

NMFS agrees and has clarified the provisions at § 680.40(e)(1)(i) and (e)(1)(ii)(D) in the final rule to note that a person's initial allocation of PQS is equivalent to that person's total qualifying legal processing history divided by all qualified history in that crab QS fishery.

Comment 69:

The provision at § 680.42(c)(4) prevents the issuance of IPQ in excess of the “IPQ cap” in the Bristol Bay red king crab fishery and the Bering Sea snow crab fishery. It is very confusing to have this provision in the section on “use limitations” since it is not a use limit, but an allocation limit. The provision should likely be moved to § 680.40(h) and/or (i), which concern the allocation of Class A IFQ and IPQ.

Response:

NMFS agrees and has moved the provision from § 680.42(c)(4) to § 680.40(h)(10) and § 680.40(j)(3), IPQ issuance limits, to avoid confusion with the use caps at § 680.42.

Comment 70:

The legislation authorizing the program provided at section 313(j) of the Magnuson-Stevens Act provides that IPQ should not create a right, title, or interest in any crab, until that crab is purchased from a fisherman. No similar language appears in the regulation. Include the language from the legislation in the regulation at § 680.40(l).

Response:

NMFS agrees. Section 680.40(l) notes that the QS and PQS permits issued under this Program do not constitute absolute rights to the resource. These limitations extend to the IFQ and IPQ resulting from the QS or PQS. NMFS modified the final rule at § 680.40(1) to more accurately reflect the legislative language at § 313(j)(7) of the Magnuson-Stevens Act.

Comment 71:

Section 313(j)(2) of the Magnuson-Stevens Act states that if the Secretary determines a processor has leveraged its IPQ to acquire Class B IFQ, the processor's IPQ shall be forfeited. If a specific regulatory re-statement of the ability of the Secretary to forfeit IPQ held by a processor that have acquired Class B IFQ is not included in the proposed rule, it should be included in the final rule.

Response:

The regulatory text in the final rule at § 680.7(f) states that it is a prohibition to use IPQ to acquire an interest in Class B IFQ. The specific requirement to forfeit those shares would be determined after investigation by NOAA Enforcement. Nothing in these regulations restricts the ability of NOAA Enforcement to require divestiture of PQS or IPQ if a person leveraged IPQ to acquire ownership interest in Class B IFQ.

Comment 72:

Section 680.42(b)(2) creates an ambiguity concerning individuals holding PQS and IPQ being exempt from the cap. Only corporations and other non-individuals that directly hold PQS and IPQ are exempt from this cap. In addition, the exemption should be limited under the cap described at (b)(4), not generally. Section 680.42(b)(2) should read, “Except for corporations and other non-individuals as provided at (b)(4) and CDQ groups as provided for at (b)(3).”

Response:

NMFS agrees. These comments now refer to the final rule at § 680.42(a)(2). Amendment 18 notes that “[a]ll individuals and subsidiaries will be subject to the general caps on QS holdings.” NMFS modified the final rule at § 680.42(a)(2) so that it is clear that except for corporations and other non-individuals and CDQ groups, the general cap that applies to QS and IFQ use would apply. This means that individuals that are holders of IPQ, or an affiliate, but not a direct corporate entity holding PQS would be subject to the QS and IFQ use caps at § 680.42(a)(2)(i).

Comment 73:

(C48-80) For PQS holders, the AFA-style 10 percent limited threshold rule is used for determining compliance with the vertical integration cap on IFQ holdings. Under this approach all QS and IFQ holdings of the holder of the PQS and all of its affiliates are counted toward the cap. The application of this rule is not clear from the proposed rule at § 680.42(b)(4). A second issue arises in this provision of the regulation because this is an additional cap to the cap at § 680.42(b)(2)(i). This cap supersedes the cap at § 680.42(b)(2)(i) only for a corporation or other non-individual directly holding the PQS. In other words, all individuals will still be subject to the individual caps at § 680.42 (b)(2)(i). Clarify the method of calculating holdings and the application of the cap and the limited exemption.

Response:

NMFS agrees and has modified the final rule at § 680.42(a)(4) accordingly. Amendment 18 notes that “[v]ertical integration ownership caps on processors shall be implemented using both the individual and collective 10 percent minimum ownership standards for inclusion in calculating the general cap” which is “similar to the AFA common ownership standard used to implement ownership caps.” The intent behind these phrases are clarified in the EIS/RIR/IRFA. This approach would function so that a non-individual person that holds PQS would be limited to a QS and IFQ cap that would be calculated based on the sum of all QS or IFQ held by that PQS holder and all QS or IFQ held by any entity that is affiliated with that PQS holder. This method would comply with the Council's intent in this provision that a corporate entity would have an exemption but that entities linked to that PQS holder through common ownership would be considered as holding QS or IFQ for purposes of applying this higher cap. The commenter is correct in that the use caps at § 680.42(a)(1)(i) would apply to all individuals, or other entities that do not hold PQS. Section 680.42(a)(4) has been modified.

It should be noted that this “AFA 10 percent threshold” method of computation is used only for purposes of computing the amount of QS and IFQ holdings that apply to QS and IFQ use caps for non-individuals that hold PQS. In the case of individuals who hold PQS, other persons that hold QS or IFQ but not PQS, or CDQ groups, QS and IFQ use caps are computed using an “individual and collective” rule. Under this standard, the amount of QS or IFQ that is computed as applying to a person is equal to the sum of the QS or IFQ held by the person and an amount equal to the percentage of holdings by that person in any entity in which that person has an interest. As an example, if an individual held QS and a 20 percent interest in another entity that held QS, the “individual and collective” rule would sum the holdings by that individual and 20 percent of the QS holdings by the other entity for purposes of computing how much QS that individual could hold. The same method would be used for IFQ holdings and IFQ use cap calculation. This “individual and collective” standard is similar to the one applied in the halibut and sablefish IFQ program for computing QS use caps under that program. The “individual and collective” rule does not require that a minimum of 10 percent ownership be triggered to count any collective holdings by a person.

Comment 74:

Caps on PQS and IPQ should use the AFA-style 10 percent limited threshold rule, not the individual and collective rule. Under this approach all PQS and IPQ holdings of the holder of the PQS and all of its affiliates are counted toward the cap.

The application of this rule is not clear from the proposed rule at § 680.42(c)(1). Clarify the method of calculating holdings.

Response:

NMFS agrees. The comment now refers to the final rule at § 680.42(b)(3). Amendment 18 notes that “PQS ownership caps should be applied using the individual and collective rule using 10 percent minimum ownership standards for inclusion in calculating the cap.” The application of this standard is similar to that which is being used in the application of the rule for calculating the amount of QS or IFQ that can be used by a non-individual that holds PQS. This approach would function so that a non-individual person that holds PQS would be limited to a PQS and IPQ cap that would be calculated based on the sum of all PQS or IPQ held by that PQS holder and all PQS or IPQ held by any entity that is affiliated with that PQS holder. This method would comply with the Council's intent that PQS or IPQ holder through common ownership would be considered as holding PQS or IPQ for purposes of applying the PQS use cap to that person at § 680.42(b)(3).

Comment 75:

Processing quota share, at § 680.40(e) of the proposed rule, is also calculated as a simple average, when Council intent was a weighted average. Total Processing Denominator (denominator is defined as “pounds * * * in each qualifying year”) appears to be an annual number. Both the pounds for each person and pounds for the TPD should be summed over the history years, and then divided to obtain the percentage.

Response:

The response to this comment has been addressed in response to comment 68.

Comment 76:

Cooling-off period waiver in the proposed rule, at § 680.42(c)(5), should be brought into compliance with Amendment 18. The ECC may not waive the cooling-off period, even for a temporary move. The ECC may waive the ROFR after the two-year period expires, as specified in the Council motion on civil contract terms for ROFR. Amendment 18 allows a community group or CDQ group to waive any right of first refusal.

Response:

The cooling off period established in Amendment 18 is reflected in the final rule at § 680.42(b)(4). The “cooling off” period that is established is based on the language used in Amendment 18. A community as defined for the “cooling off” period cannot waive the cooling off period, and nothing in these regulations would permit them to do so. An IPQ holder may use IPQ outside of a community during the “cooling off” period only under the limited exemptions provided by Amendment 18 and in § 680.42(b)(4) for a small amount of IPQ and to address unforseen circumstances.

Comment 77:

Council intent was that any PQS earned based on processing history in the West region would be designated as west region PQS. However, the regulations at § 680.40(e)(2) state that a person will receive only west PQS if, at the time of the application, that person owns a crab processing facility that is located in the West region.

Response:

Amendment 18 notes that the allocation of West regionally designated PQS in the WAG crab QS fishery would be made to “to participants with processing facilities in the West.” This statement is distinct from the criteria used in designating the allocation of PQS in the other fisheries. The allocation criteria here are explicit in that the allocation of West region QS is based on the ownership of a processing facility in the West region, and NMFS has determined this to mean ownership of a processing facility in the West region at the time of application. The rule has not been modified.

Comment 78:

Public Law 108-199 Section 801(j)(6) states that the Secretary may revoke any IPQ held by any person found to have violated a provision of the antitrust laws of the United States. If a specific regulatory re-statement of the ability of the Secretary to revoke IPQ held by a person found to have violated antitrust law is not included in the proposed rule, it should be included in the final rule.

Response:

NMFS does have the ability to revoke any IPQ held by a person that has violated an antitrust law of the United States as granted by this provision. This statutory authority was not part of the proposed rule but is an authority that exists under section 313(j) of the Magnuson-Stevens Act. An explicit regulatory statement was not placed in the proposed rule because it was not deemed necessary to reiterate the authority that NMFS has to revoke IPQ under these conditions. The rule has not been modified, but NMFS has the statutory authority to revoke IPQ for antitrust violations if necessary after review under the Magnuson-Stevens Act.

Comment 79:

The Council motion recommends that NOAA Fisheries award PQS to processors that purchased crab during the relevant processing history years based on the entity that signed the fish ticket and did not base the award of PQS on the location where the crab was physically processed. The Council recognized and acknowledged the use of custom processing and the regulation correctly reflects that Council intent in its definition of the initial award of PQS. The regulations do not specify how custom processing affects processor use caps; IPQ transfers; and community protection provisions. We believe that in order to achieve the efficiencies envisioned, custom processing will be used extensively in the future. Therefore we believe the final rule should treat custom processing as follows: Custom Processing and IPQ leasing should each be counted against the use cap of the processor doing the physical processing. For example, PQS holder X holds IPQ and purchases crab, which is processed by PQS holder Y. PQS holder X is subject to the use cap because it holds the IPQ. Processor Y's use cap calculation should include both its own IPQ and the amount that it is physically processing for PQS holder X.

Response:

Amendment 18 notes that “limits on ownership and use would count any crab custom processed by a plant toward the cap of the plant owner. The application of the cap to custom processing is intended to prevent consolidation which could occur if custom processing is not considered.” The proposed rule does not require that the processing which is occurring at a facility be counted against the owner of the facility if the owner also holds IPQ. Under Amendment 18, any IPQ that is “custom processed” at a facility would be counted against both the IPQ holder (the custom processor) and the IPQ holder that owns the facility. This accounting is potentially problematic in that there may be cases in which a processing facility is owned by multiple IPQ holders, or is not owned by an IPQ holder at all. In cases of multiple IPQ holders owning a processing facility, it is not clear whether the amount of IPQ crab custom processed at a facility would be counted against all IPQ holders on a pro rata basis, or in proportion to their ownership in the processing facility. It would also create a situation where IPQ use would be “double counted”, resulting in less IPQ being available to Class A IFQ holders that is needed.

To implement this provision of Amendment 18, NMFS modified the final rule at § 680.7(a)(7) to note that no IPQ holder may use more IPQ crab than the maximum amount of IPQ that may be held by that person including all crab that are received by any RCR at any shoreside crab processor or stationary crab processor in which that IPQ holder has a 10 percent or greater direct or indirect ownership interest. Therefore, a person that holds IPQ is limited to an

IPQ use cap based on: The sum of all IPQ held by that IPQ holder and all IPQ held by any entity in which that PQS holder has a 10 percent or greater direct or indirect ownership interest; and any IPQ crab that is received at a shoreside crab processor or stationary floating crab processor owned by that IPQ holder.

Ownership of a processing facility is defined as having a 10 percent or greater direct or indirect interest in the processing facility. This modification better comports with the intent of Amendment 18. NMFS will not directly collect ownership information on processing facilities, however, any IPQ holder that owns a processing facility is responsible for maintaining records adequate to ensure that the IPQ use caps are not exceeded through custom processing arrangements established by IPQ holders that also own processing facilities. NMFS will be able to account for processing facility ownership using the EDR required under this Program, should a specific facility or IPQ holder need to be investigated.

In addition, NMFS has added a prohibition to the final rule at § 680.7(a)(8) so that in those cases where a processing facility is not owned by an IPQ holder, no RCR or group of RCRs may receive more than 30 percent of the IPQ in any crab QS fishery at any shoreside crab processor or stationary crab processor. This limitation meets the requirements of Amendment 18 to limit the amount of processing that could be done at any one facility and limits the ability for IPQ holders to simply divest themselves of ownership in a processing facility as a means of avoiding the limitations on IPQ use through custom processing arrangements.

Comment 80:

Lease of IPQ or physical processing outside the community should each count for purposes of community protections and should require agency transfer approval.

Response:

Use of IPQ outside of an ECC would be considered as subjecting those IPQ shares and the underlying PQS to the cooling off and ROFR provisions as revised in this final rule. Any transfer of IPQ for use outside of that ECC subject to the cooling off provision or ROFR would need to be approved by NMFS under the current regulations. The rule has not been modified.

Comment 81:

Processor interests should be made entirely transparent to authorized fisheries managers and enforcement officials, as well as to the antitrust authorities, and all available tools for preventing and punishing anti-competitive processor behavior should be employed aggressively. The important safeguards contemplated by the Magnuson-Stevens Act and the antitrust laws, and reflected in the proposed rule, should be preserved.

Response:

This Program requires extensive reporting of data by both harvesters and processors in order to ensure that existing antitrust laws are not violated and that the goals of this Program are met. These data can be used to investigate activities of concern.

Comment 82:

The allocations of PQS are not equitable because processors with history processing crab in Alaska that do not meet the eligibility qualifications at § 680.40(d)(3) would not receive PQS. Specifically, if a processor lost its facility due to fire, and did not make $1,000,000 worth of improvements to that facility, it would not qualify for the hardship exemption for eligibility at § 680.40(d)(3)(ii)(B). These regulations eliminate competition and prevent boats from delivering to a native-Alaskan owned processor with a long hist

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