Shipping Act, Merchant Marine, and Magnuson-Stevens Fishery Conservation and Management Act (Magnuson-Stevens Act) Provisions; Fishing Vessel, Fishing Facility and Individual Fishing Quota Lending Program, 78619-78631 [2010-31641]

Agencies

• DEPARTMENT OF COMMERCE
• National Oceanic and Atmospheric Administration

[Federal Register Volume 75, Number 241 (Thursday, December 16, 2010)]
[Rules and Regulations]
[Pages 78619-78631]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-31641]


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DEPARTMENT OF COMMERCE

National Oceanic and Atmospheric Administration

50 CFR Part 253

[Docket No. 0908061221-0533-02]
RIN 0648-AY16


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

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

ACTION: Final rule.

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SUMMARY: NMFS issues these regulations pursuant to its authority under 
Chapter 537 of the Shipping Act, (formerly known as Title XI of the 
Merchant Marine Act of 1936, as amended and codified), as well as the 
Magnuson-Stevens Act. These regulations revise the operating rules of 
the Fisheries Finance Program (FFP or Program) and set forth 
procedures, eligibility criteria, loan terms, and other requirements 
related to FFP lending to the commercial fishing and aquaculture 
industries. FFP assistance includes

[[Page 78620]]

loans for fishing vessels, fish processing facilities, aquaculture 
facilities, individual fishing quota (IFQ) permits, and participants in 
community development quota (CDQ) programs.

DATES: This final rule is effective January 18, 2011.

ADDRESSES: Copies of supporting documents that were prepared for this 
final rule, as well as the proposed rule, are available via the Federal 
e-Rulemaking portal, at https://www.regulations.gov. Those documents are 
also available from the NMFS, MB5, 1315 East-West Highway, Silver 
Spring, Maryland 20910.

FOR FURTHER INFORMATION CONTACT: Earl Bennett, NMFS, Fisheries Finance 
Program, 301-713-2390.

SUPPLEMENTARY INFORMATION:

Electronic Access

    This final rule is also accessible at https://www.gpoaccess.gov/fr.

Background

    On May 5, 2010, NMFS published a proposed rule to revise the FFP's 
lending regulations, as found in subpart B of 50 CFR Part 253, and 
requested public comment (75 FR 24549). This final rule strikes and 
replaces the current Subpart B with new regulations reflecting the 2006 
revision of Chapter 537 of the Shipping Act (referenced as ``Title 
XI''), the amended Magnuson-Stevens Act, Section 211(e) of the American 
Fisheries Act (AFA), Public Law 105-277, Div. C, Title II, Subtitle II, 
and the Coast Guard and Maritime Transportation Act of 2006, Public Law 
109-241. In addition to revising definitions and updating general 
lending requirements, this final rule provides detail and clarity to 
the term ``Actual Cost;'' establishes procedures for refusing to 
approve, close or disburse a loan to borrowers with unresolved 
fisheries enforcement violations; and sets forth specialized terms and 
requirements for halibut and sablefish quota share (HSQS) loans, Bering 
Sea and Aleutian Island (BSAI) crab IFQ loans, and loans to North 
Pacific CDQ program participants.

Comment and Responses

    Between May 5, 2010, and June 4, 2010, NMFS solicited comments on 
the proposed rule. On August 25, 2010, NMFS reopened the comment period 
for an additional two weeks when it discovered that a misprint in the 
preamble to the proposed rule could have hindered submission of 
comments on https://www.regulations.gov (75 FR [page 52300]).
    Public comments on the proposed rule are summarized below, with 
responses from NMFS. NMFS received comments from four separate 
commenters. Overall, the comments about the Program and the proposed 
rule were favorable. Only one commenter had negative comments. The 
negative comments did not pertain to the specifics of the proposed 
rule, but addressed general NMFS policy.
    Comment 1: The FFP has proved enormously beneficial to its 
participants. The proposed rule conforms to the intent of Congress, the 
North Pacific Fishery Management Council, and the Secretary of 
Commerce. The Crab IFQ loan program is the only step of crab 
rationalization that has yet to be implemented, so the proposed rule 
should be made final promptly.
    Response: NMFS notes the comment.
    Comment 2: The FFP is based on 1936 law and is outdated. The FFP 
should be a private sector lending operation, and there is no reason 
for American taxpayers to lend money to build boats or help commercial 
fishermen become profitable. There is much graft and corruption in the 
FFP; it should be defunded, and NMFS should be shut down.
    Response: NMFS notes that the most recent version of the FFP's 
primary statutory authorization was enacted in 2006, so the FFP is in 
fact not outdated. Additionally, NMFS disagrees with the sentiments the 
commenter expressed about the fishing industry and the purpose of the 
FFP. Commercial fishing is an important industry and many Americans 
make their livelihood fishing. Maintaining a vibrant fishing sector is 
important to the National economy, as well as to coastal communities. 
NMFS notes that the FFP does not lend money to finance the construction 
of new vessels or improvements that increase harvest capacity. 
Moreover, NMFS disagrees with the commenter's characterization of the 
FFP. The FFP is audited annually by KPMG, an independent auditing 
company, and from time to time has been reviewed by NOAA auditors and 
the Department of Commerce's Office of the Inspector General. No 
allegations of graft or corruption have resulted from any of these 
reviews.
    Comment 3: When NMFS funds a boat, it is likely to grant that boat 
too much quota to catch.
    Response: FFP lending decisions and fishery management decisions 
are unrelated. Whether a vessel has an FFP loan has no bearing on 
whether it receives any authorization to harvest, process, or sell fish 
or fishery resources. Moreover, the FFP will not lend money for a 
fishing vessel unless the owner can demonstrate that it and the vessel 
possess all necessary harvest authorizations and permits and fully 
complies with all applicable law.
    Comment 4: Americans do not want to fund aquaculture. Aquaculture 
pollutes horribly and spending on it is stupid and graft personified.
    Response: NMFS disagrees. NMFS believes that sustainable 
aquaculture will create employment and business opportunities in 
coastal communities; provide safe, sustainable seafood; and complement 
NOAA's comprehensive strategy for maintaining healthy and productive 
marine populations, species, and ecosystems. All Program lending for 
aquaculture facilities require that such facilities are in compliance 
with all Federal, state and local environmental statutes and 
regulations. Additionally, they must possess all required licenses and 
permits.
    Comment 5: A requirement for a preferred ship mortgage when 
financing a fishing vessel is not set forth in the proposed rule.
    Response: NMFS notes the comment. Taken together, 46 U.S.C. 
53709(b)(1) and (b)(4) limit FFP loans to 80 percent of the actual cost 
or depreciated actual cost of collateral pledged as security. NMFS 
acknowledges that the statutory provisions require the FFP to take a 
security interest in project property; otherwise the statutory terms 
would be rendered meaningless. Although the FFP's past practice has 
always been to take a security interest in project property, NMFS has 
clarified that it will take security interest in project property in 
this final rule in response to this comment. Such security interest may 
consist of, for example, a preferred ship mortgage for vessel 
financings, a real property deed of trust, mortgage, assignment of 
lease or other adequate collateral interest for aquaculture and 
shoreside facilities, etc. The final rule retains the Program's 
discretion to require additional collateral, as the FFP deems 
necessary, to protect the Program's credit interest.
    Comment 6: Subject to a few exceptions, the proposed rule expresses 
a clear policy against financing the construction of new vessels or 
vessel improvements that increase harvest capacity. This policy, which 
has the effect of precluding the use of FFP loans to construct new 
vessels, should not apply in rationalized quota fisheries where total 
allowable catch is allocated to quota holders. In such fisheries, 
increasing a vessel's harvest capacity is irrelevant because each quota 
holder is limited to harvesting only a specific

[[Page 78621]]

amount of fish. In addition, replacing existing vessels would reduce 
fuel consumption and vessel traffic as older platforms are replaced 
with larger, more efficient ones. Section 253.26(d)(1) should be 
amended to allow the FFP to lend for, ``Activities that assist in the 
transition to reduced fishing capacity or where such activities will 
not adversely increase fishing effort in targeted fisheries.''
    Response: Although NMFS acknowledges that regulatory fishing effort 
controls (especially in fisheries that may allocate specific amounts of 
catch with catch shares) can effectively manage harvest capacity, NMFS 
declines to change its capacity neutral lending policy, as requested by 
the commenter. However, NMFS notes that vessel improvements that assist 
in the transition to reduced fishing capacity, as well as those adding 
technologies or upgrades that improve data collection, reduce bycatch, 
improve harvest selectivity, reduce adverse environmental impacts of 
fishing gear, or improve safety, will continue to be eligible for 
financing even if such projects make ancillary increases to a vessel's 
harvest capacity.
    Even in so called ``rationalized fisheries,'' adding new vessels 
and introducing vessels with augmented harvest capacity can push effort 
into other fisheries. Although overall harvest levels may remain 
unchanged, as a new vessel replaces an existing vessel, the owner or 
operator may have an incentive to sell the old vessel or employ it in a 
different fishery. Similarly, efficiencies brought on by increasing a 
vessel's harvest capacity may displace one or more additional vessels, 
and the displaced vessel(s) may exacerbate problems in other locations 
by moving into them. In addition to fishing effort displacement, the 
FFP lacks the staff resources to undertake detailed reporting and 
heightened due diligence required to support loan commitments for new 
vessel construction. Currently, the FFP's credit risk model doesn't 
account for the added risks associated with taking security interests 
in construction materials or addressing shipyard liens. Accordingly, 
NMFS will retain its policy against financing the construction of new 
vessels or vessel improvements primarily designed to increase harvest 
capacity.
    Comment 7: Only the six CDQ group entities specified in section 
305(i)(1)(D) of the Magnuson-Stevens Act should be eligible to 
participate in the CDQ loan program. Listing all of the villages and 
not the representative groups is misleading, since the villages can 
only participate through their groups. The CDQ program is a closed 
class and no new villages or entities can be added without a statutory 
amendment.
    Response: While it is true that section 305(i) of the Magnuson-
Stevens Act, as amended, focuses on the six CDQ groups, the CDQ lending 
program in this final rule is authorized by section 211(e) of the AFA. 
Section 211(e) of the AFA extends loan eligibility to the ``communities 
eligible to participate'' consistent with the section 305(i) provisions 
in effect in 1998, the time of the AFA's passage. However, NMFS 
recognizes that meaningful participation in the loan program would be 
enhanced by the involvement of the six CDQ groups. Accordingly, NMFS 
listed CDQ groups in the proposed rule and lists them again in this 
final rule. Although NMFS acknowledges that only the six groups and 
various villages listed in the final rule are eligible, NMFS will 
retain the section 253.29(c)(7) provision to allow statutory expansion 
of the CDQ program without the need to wait for a corresponding change 
in the regulations.
    Comment 8: The 2006 Science-State-Commerce Appropriations Act, 
Public Law 109-108, as amended by section 416(c)(2) of the Coast Guard 
and Maritime Transportation Act of 2006, Public Law 109-241, and 
section 211(e) of the AFA, mandate that eligible CDQ borrowers be 
allowed to use loan funds for the purchase of all or part of ownership 
interests in fishing or processing vessels.
    Response: NMFS agrees that borrowers in the CDQ loan program may 
use FFP financing to purchase full or partial interests in BSAI fishing 
vessels, shoreside facilities, and fishing licenses; and NMFS is 
willing to lend for these purposes, so long as the borrower is able to 
provide a valid security interest in collateral financed by the loan. 
However, NMFS has determined that the statutory provisions that the 
commenter cites do not create any ``mandate'' to lend that would 
supersede the requirements of other statutes. Notably, section 211(e) 
of the AFA expands the legal authority found in the FFP's primary 
statutory authority (the provisions referenced as ``Title XI'') to 
allow the FFP to make loans to CDQ eligible entities, for the purposes 
specified in the statute. Also, the 2006 appropriation act, as amended, 
provides the actual funds to cover the budgetary cost under the Federal 
Credit Reform Act of 1990, 2 U.S.C. 661 et seq., so that the FFP can 
``afford'' to make the loans. The authority to make CDQ loans still 
stems from Title XI, which requires that the FFP obtain adequate 
security interests in its collateral, and the FFP knows of no other 
provisions that supersede this requirement. Thus, while NMFS agrees 
that certain loan funds may be used to purchase all or part of an 
interest in a fishing or processing vessel, other requirements still 
attach to those loans, even if there is a ``mandate'' for such loans. 
NMFS cannot make any loans, even to CDQ borrowers for eligible 
purposes, without adequate security interest(s) in the collateral.
    Comment 9: In order to allow CDQ program entities to purchase a 
partial interest in a vessel without a first lien position security 
interest, NMFS should change section 253.29(d)(2) of the rule by adding 
the following sentence: ``Notwithstanding any other provision in this 
section, the Program shall not require a first lien position on the 
whole of the primary collateral when only a partial interest of such 
primary collateral is purchased with such loan funds.'' NMFS' 
requirement for a lien upon the whole of a vessel has precluded one or 
more CDQ entities from using FFP loan funds to make a purchase of a 
partial ownership interest because the other owner did not want its 
interest encumbered by a NMFS preferred ship mortgage.
    Response: NMFS is unable to make the requested change because it 
contravenes existing law. Under the Ship Mortgage Act, 46 U.S.C. 
sections 31301-30, a mortgage lien must apply to the whole vessel 
pledged as collateral in order to attain the status of a ``first 
preferred ship mortgage,'' regardless of whether the financing is used 
to purchase or acquire a whole vessel or only a partial ownership 
interest in the vessel. Pursuant to the requirements of 46 U.S.C. 
53711, NMFS determines that a recorded preferred ship mortgage is the 
only instrument that will create, attach and perfect the requisite 
security interest in a federally documented vessel or its 
appurtenances, which in turn is necessary to protect the interest of 
the United States Government. NMFS has more flexibility to adjust the 
priority of its mortgage liens to allow for unique circumstances or 
complex transactions, but NMFS is unable to alter the requirements of 
the Ship Mortgage Act.
    Comment 10: The relevant statutes and the proposed rule mandate 
flexibility in regards to the collateral requirements for FFP loans to 
the CDQ program entities.
    Response: Although Title XI grants NMFS some discretion to adjust 
collateral requirements, the Program's authorizing statute still 
requires that the FFP, at a minimum, take a security interest in the 
property that the loan finances or refinances. NMFS does not

[[Page 78622]]

construe the proposed regulations or the statutory provisions 
applicable to CDQ lending as superseding the required security 
determinations, loan limits and collateral requirements set forth in 
statute, in particular 46 U.S.C. 53709 and 53711. Moreover, NMFS is not 
under any requirement to approve every loan application. Nevertheless, 
NMFS remains committed to make reasonable loans to CDQ groups with as 
much flexibility in the collateral requirements, as is appropriate, 
within the bounds of its lending authorities.
    Comment 11: Including the current market value of the land used by 
a facility that is pledged as collateral in the revised definition of 
Actual Cost better reflects the true value of the collateral.
    Response: NMFS agrees. The unique nature of land can result in 
absurd results when using pure cost basis to determine asset value. For 
instance, using the purchase price and accounting costs may fail to 
reflect actual value if an applicant has owned the land for an extended 
period; and, purchase price alone may not reflect the true liquidation 
value of real property in times of price volatility. Accordingly, NMFS 
uses current market valued to determine asset value for the purposes of 
loans under the Program.
    Comment 12: Valuing refinanced limited entry privileges using a 
current market value metric based on contemporaneous comparable sales 
will provide existing permit holders with flexibility for their 
existing permits.
    Response: The FFP's experience over the last 12 years has shown 
that the value of quota can fluctuate over time, making current market 
value the most useful starting point to evaluate quota. In its approval 
process, the FFP will also examine the trend in value of individual 
fisheries' quota. However, NMFS emphasizes that the final rule retains 
the FFP's policy to deny applications that will disburse more than an 
applicant's outstanding indebtedness, calculated as principal and 
accrued interest, when refinancing an existing loan.
    Comment 13: FFP funds should not be used to finance the purchase of 
new limited entry privileges at this time. This opposition is based 
solely on the practical fact that the FFP loan authority is not 
sufficiently funded at this time to enable the agency to meet all 
traditional loan applications, as well as financing for aquaculture, 
new IFQ financing, and new permit funding. Loan authority should be 
restored to the peak levels of prior budget cycles.
    Response: The FFP receives two separate loan funding authorities. 
One is for the traditional loan program, and a separate authorization 
is for IFQ lending. Approving IFQ loans does not decrease the loan 
authority available for traditional loans and vice versa. Although NMFS 
has no final control over what is ultimately established as a lending 
ceiling, or funds given in annual appropriations legislation, NMFS will 
track the demand for both traditional and IFQ lending, and may include 
a request in its submission for the President's budget for greater loan 
authority if it deems it necessary.
    Comment 14: FFP loan authority should be used to implement an IFQ 
loan program consistent with the Magnuson-Stevens Act. The onset of the 
new NOAA policy on catch shares will make FFP lending an important tool 
for the commercial fishing industry.
    Response: NMFS notes the comment; however, NMFS points out that the 
decision to implement an IFQ program for any particular fishery lies 
with the appropriate Fishery Management Council.

Changes From the Proposed Rule

    General FFP credit standards and requirements section 253.11 (j) is 
changed to reflect the terms of 46 U.S.C. 53709(b)(1) and (b)(4) which, 
collectively, require that any loan amount be limited to 80 percent of 
the actual cost or depreciated actual cost of the property used as 
security. By implication, this will require the FFP to take a security 
interest in the specified project property, and that the value of the 
collateral pledged will limit the aggregate amount of the loan. The 
proposed rule allowed the Program to waive this requirement or allow 
substitute collateral. This rule now requires a first lien position on 
the project's primary collateral. The FFP may still take junior lien 
positions on secondary collateral. NMFS also made minor changes to 
correct errors or improve readability that do not affect the 
substantive provisions of the rule.

Classification

    The NMFS Assistant Administrator has determined that this final 
rule is published under the authority of Chapter 537 of the Shipping 
Act, and is consistent with the Magnuson-Stevens Act, as amended, and 
other applicable law.

Executive Order 12866

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

Regulatory Flexibility Act

    The Chief Counsel for Regulation of the Department of Commerce has 
certified to the Chief Counsel for Advocacy of the Small Business 
Administration (SBA) that this rule will not have a significant 
economic impact on a substantial number of small entities. The reasons 
for this certification are explained in the proposed rule (75 FR 24549) 
and are not fully repeated here. Briefly, the Department certified that 
this rule will not have a significant economic impact on a substantial 
number of small businesses because:

    Both small and large entities benefit from the availability of 
long-term, fixed rate financing. Community Development Quota (CDQ) 
groups, which consist of 65 Western Alaskan villages combined into 
six community coalitions, benefit from the positive economic 
opportunities that FFP lending provides. The proposed rule has no 
adverse impacts on small business entities because of the nature of 
the rule. Applications by small business entities for program 
financing are voluntary. No mandatory requirements are placed on any 
small business. No small entities are directly regulated by this 
rule. Those small business entities that use the program do so for 
beneficial impacts.

    This certification was provided to the public for comment, and NMFS 
received no comments or concerns related to the certification. 
Accordingly, no regulatory analysis is required and none has been 
prepared.

Paperwork Reduction Act

    This final rule contains collection-of information requirements 
subject to the Paperwork Reduction Act (PRA). The collections of 
information have been approved by the Office of Management and Budget 
(OMB) under OMB Control Numbers 0648-0012 (traditional loan 
application) and 0648-0272 (IFQ loan application). The public reporting 
burden for the FFP financing is estimated to average eight hours per 
response, including the time for reviewing instructions, searching 
existing data sources, gathering and maintaining the data needed, and 
completing and reviewing the collection of information. Send comments 
regarding these burden estimates or any other aspect of this data 
information, including suggestions for reducing the burden, to NMFS 
(see ADDRESSES) and by e-mail to OIRA_submission@omb.eop.gov, or fax 
to 202-395-7285.

List of Subjects in 50 CFR Part 253

    Aquaculture, Community development groups, Direct lending,

[[Page 78623]]

Financial assistance, Fisheries, Fishing, Individual fishing quota.

    Dated: December 10, 2010.
Samuel D. Rauch III,
Deputy Assistant Administrator for Regulatory Programs, National Marine 
Fisheries Service.

0
For the reasons set out in the preamble, 50 CFR part 253 is revised as 
follows.

PART 253--FISHERIES ASSISTANCE PROGRAMS

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

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

Subpart A--General


Sec.  253.1  Purpose.

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

Subpart B--Fisheries Finance Program


253.10  General definitions.

    The terms used in this subpart have the following meanings:
    Act means Chapter 537 of Title 46 of the U.S. Code, (46 U.S.C. 
53701-35), as may be amended from time to time.
    Actual cost means the sum of all amounts for a project paid by an 
obligor (or related person), as well as all amounts that the Program 
determines the obligor will become obligated to pay, as such amounts 
are calculated by Sec.  253.16.
    Applicant means the individual or entity applying for a loan (the 
prospective obligor).
    Application means the documents provided to or requested by NMFS 
from an applicant to apply for a loan.
    Application fee means 0.5 percent of the dollar amount of financing 
requested.
    Approval in principle letter (AIP) means a written communication 
from NMFS to the applicant expressing the agency's commitment to 
provide financing for a project, subject to all applicable regulatory 
and Program requirements and in accordance with the terms and 
conditions contained in the AIP.
    Aquaculture facility means land, structures, appurtenances, 
laboratories, water craft built in the U.S., and any equipment used for 
the hatching, caring for, or growing fish, under controlled 
circumstances for commercial purposes, as well as the unloading, 
receiving, holding, processing, or distribution of such fish.
    Capital Construction Fund (CCF), as described under 46 U.S.C. 
53501-17, allows owners of eligible vessels to reserve capital for 
replacement vessels, additional vessels, reconstruction of vessels, or 
reconstructed vessels, built in the United States and documented under 
the laws of the United States, for operation in the fisheries of the 
United States.
    Captain means a vessel operator or a vessel master.
    Charter fishing means fishing from a vessel carrying a ``passenger 
for hire,'' as defined in 46 U.S.C. 2101(21a), such passenger being 
engaged in recreational fishing, from whom consideration is provided as 
a condition of carriage on the vessel, whether directly or indirectly 
flowing to the owner, charterer, operator, agent, or any other person 
having an interest in the vessel.
    Citizen means a ``citizen of the United States,'' as described in 
46 U.S.C. 104, or an entity who is a citizen for the purpose of 
documenting a vessel in the coastwise trade under 46 U.S.C. 50501.
    Crewman means any individual, other than a captain, a passenger for 
hire, or a fisheries observer working on a vessel that is engaged in 
fishing.
    Demand means a noteholder's request that a debtor or guarantor pay 
a note's full principal and interest balance.
    Facility means a fishery or an aquaculture facility.
    Fish means finfish, mollusks, crustaceans and all other forms of 
aquatic animal and plant life, other than marine mammals and birds.
    Fisheries harvest authorization means any transferable permit, 
license or other right, approval, or privilege to engage in fishing.
    Fishery facility means land, land structures, water craft that do 
not engage in fishing, and equipment used for transporting, unloading, 
receiving, holding, processing, preserving, or distributing fish for 
commercial purposes (including any water craft used for charter 
fishing).
    Fishing means:
    (1) The catching, taking, or harvesting of fish;
    (2) The attempted catching, taking, or harvesting of fish;
    (3) Any other activity which can reasonably be expected to result 
in the catching, taking, or harvesting of fish;
    (4) Any operations at sea in support of, or in preparation for, any 
activity described in paragraphs (1) through (3) of this section.
    (5) Fishing does not include any scientific research activity which 
is conducted by a scientific research vessel.
    Fishing industry for the purposes of this part, means the broad 
sector of the national economy comprised of persons or entities that 
are engaged in or substantially associated with fishing, including 
aquaculture, charter operators, guides, harvesters, outfitters, 
processors, suppliers, among others, without regard to the location of 
their

[[Page 78624]]

activity or whether they are engaged in fishing for wild stocks or 
aquaculture.
    Guarantee means a guarantor's contractual promise to repay 
indebtedness if an obligor fails to repay as agreed.
    Guarantee fee means one percent of a guaranteed note's average 
annual unpaid principal balance.
    Guaranteed note means a promissory note from an obligor to a 
noteholder, the repayment of which the United States guarantees.
    IFQ means Individual Fishing Quota, which is a Federal permit under 
a limited access system to harvest a quantity of fish, expressed by a 
unit or units representing a percentage of the total allowable catch of 
a fishery that may be received or held for exclusive use by a person. 
IFQ does not include community development quotas.
    Noteholder means a guaranteed note payee.
    Obligor means a party primarily liable for payment of the principal 
of or interest on an obligation, used interchangeably with the terms 
``note payor'' or ``notemaker.''
    Origination year means the year in which an application for a loan 
is accepted for processing.
    Program means the Fisheries Finance Program, Financial Services 
Division, National Marine Fisheries Service, National Oceanic and 
Atmospheric Administration, U.S. Department of Commerce.
    Project means:
    (1) The refinancing or construction of a new fishing vessel or the 
financing or refinancing of a fishery or aquaculture facility or the 
refurbishing or purchase of an existing vessel or facility, including, 
but not limited to, architectural, engineering, inspection, delivery, 
outfitting, and interest costs, as well as the cost of any consulting 
contract the Program requires;
    (2) The purchase or refinance of any limited access privilege, IFQ, 
fisheries access right, permit, or other fisheries harvest 
authorization, for which the actual cost of the purchase of such 
authorization would be eligible under the Act for direct loans;
    (3) Activities (other than fishing capacity reduction, as set forth 
in part 600.1000 of this title) that assist in the transition to 
reduced fishing capacity;
    (4) Technologies or upgrades designed to improve collection and 
reporting of fishery-dependent data, to reduce bycatch, to improve 
selectivity or reduce adverse impacts of fishing gear, or to improve 
safety; or
    (5) Any other activity that helps develop the U.S. fishing 
industry, including, but not limited to, measures designed or intended 
to improve a vessel's fuel efficiency, to increase fisheries exports, 
to develop an underutilized fishery, or to enhance financial stability, 
financial performance, growth, productivity, or any other business 
attribute related to fishing or fisheries.
    RAM means the Restricted Access Management division in the Alaska 
Regional Office of NMFS or the office that undertakes the duties of 
this division to issue or manage quota shares.
    Refinancing means newer debt that either replaces older debt or 
reimburses applicants for previous expenditures.
    Refinancing/assumption fee means a one time fee assessed on the 
principal amount of an existing FFP note to be refinanced or assumed.
    Refurbishing means any reconstruction, reconditioning, or other 
improvement of existing vessels or facilities, but does not include 
routine repairs or activities characterized as maintenance.
    Security documents mean all documents related to the collateral 
securing the U.S. Note's repayment and all other assurances, 
undertakings, and contractual arrangements associated with financing or 
guarantees provided by NMFS.
    Underutilized fishery means any stock of fish (a) harvested below 
its optimum yield or (b) limited to a level of harvest or cultivation 
below that corresponding to optimum yield by the lack of aggregate 
facilities.
    U.S. means the United States of America and, for citizenship 
purposes, includes the fifty states, Commonwealth of Puerto Rico, 
American Samoa, the Territory of the U.S. Virgin Islands, Guam, the 
Republic of the Marshal Islands, the Federated States of Micronesia, 
the Commonwealth of the Northern Mariana Islands, and any other 
commonwealth, territory, or possession of the United States, or any 
political subdivision of any of them.
    U.S. Note means a promissory note payable by the obligor to the 
United States.
    Useful life means the period during which project property will, as 
determined by the Program, remain economically productive.
    Vessel means any vessel documented under U.S. law and used for 
fishing.
    Wise use means the development, advancement, management, 
conservation, and protection of fishery resources, that is not 
inconsistent with the National Standards for Fishery Conservation and 
Management (16 U.S.C. 1851) and any other relevant criteria, as may be 
specified in applicable statutes, regulations, Fishery Management 
Plans, or NMFS guidance.


Sec.  253.11  General FFP credit standards and requirements.

    (a) Principal. Unless explicitly stated otherwise in these 
regulations or applicable statutes, the amount of any loan may not 
exceed 80 percent of actual cost, as such term is described in Sec.  
253.16; provided that the Program may approve an amount that is less, 
in accordance with its credit determination.
    (b) Interest rate. Each loan's annual interest rate will be 2 
percent greater than the U.S. Department of Treasury's cost of 
borrowing public funds of an equivalent maturity at the time the loan 
closes.
    (c) Ability and experience requirements. An obligor and the 
majority of its principals must demonstrate the ability, experience, 
resources, character, reputation, and other qualifications the Program 
deems necessary for successfully operating the project property and 
protecting the Program's interest in the project.
    (d) Lending restrictions. Unless it can document that unique or 
extraordinary circumstances exist, the Program will not provide 
financing:
    (1) For venture capital purposes; or
    (2) To an applicant who cannot document successful fishing industry 
ability and experience of a duration, degree, and nature that the 
Program deems necessary to successfully repay the requested loan.
    (e) Income and expense projections. The Program, using conservative 
income and expense projections for the project property's operation, 
must determine that projected net earnings can service all debt, 
properly maintain the project property, and protect the Program's 
interest against risks of loss, including the industry's cyclical 
economics.
    (f) Working capital. The Program must determine that a project has 
sufficient initial working capital to achieve net earnings projections, 
fund all foreseeable contingencies, and protect the Program's interest 
in the project. In making its determination, the Program will use a 
conservative assessment of an applicant's financial condition, and at 
the Program's discretion, some portion of projected working capital 
needs may be met by something other than current assets minus 
liabilities (i.e., by a line or letter of credit, non-current assets 
readily capable of generating working capital, a guarantor with 
sufficient financial resources, etc.).
    (g) Audited financial statements. Audited financial statements will 
ordinarily be required for any obligor

[[Page 78625]]

with large or financially complex operations, as determined by the 
program, whose financial condition the Program believes cannot be 
otherwise assessed with reasonable certainty.
    (h) Consultant services. Expert consulting services may be 
necessary to help the Program assess a project's economic, technical, 
or financial feasibility. The Program will notify the applicant if an 
expert is required. The Program will select and employ the necessary 
consultant, but require the applicant to reimburse the Program for any 
fees charged by the consultant. In the event that an application 
requires expert consulting services, the loan will not be closed until 
the applicant fully reimburses the Program for the consulting fees. 
This cost may, at the Program's discretion, be included in the amount 
of the note. For a declined application, the Program may reimburse 
itself from the application fee as described in Sec.  253.12, including 
any portion known as the commitment fee that could otherwise be 
refunded to the applicant.
    (i) Property inspections. The Program may require adequate 
condition and valuation inspection of all property used as collateral 
as the basis for assessing the property's worth and suitability for 
lending. The Program may also require these at specified periods during 
the life of the loan. These must be conducted by competent and 
impartial inspectors acceptable to the Program. Inspection cost(s) will 
be at an applicant's expense. Those occurring before application 
approval may be included in actual cost, as actual cost is described in 
Sec.  253.16.
    (j) Collateral. The Program shall have first lien(s) on all primary 
project property pledged as collateral. The Program, at its discretion, 
may request additional collateral and will consider any additional 
collateral in its credit determinations.
    (k) No additional liens. All primary project property pledged as 
collateral, including any additional collateral, shall be free of 
additional liens, unless the Program, at the request of the applicant, 
expressly waives this requirement in writing.
    (l) General FFP credit standards apply. Unless explicitly stated 
otherwise in these rules, all FFP direct lending is subject to the 
above general credit standards and requirements found in Sec. Sec.  
253.12 through 253.30. The Program may adjust collateral, guarantee and 
other requirements to reflect individual credit risks.
    (m) Adverse legal proceedings. The Program, at its own discretion, 
may decline or hold in abeyance any loan approval or disbursement(s) to 
any applicant found to have outstanding lawsuits, citations, hearings, 
liabilities, appeals, sanctions or other pending actions whose negative 
outcome could significantly impact, in the opinion of the Program, the 
financial circumstances of the applicant.


Sec.  253.12  Credit application.

    (a) Applicant. (1) An applicant must be a U.S. citizen and be 
eligible to document a vessel in the coastwise trade: and
    (2) Only the legal title holder of project property, or its parent 
company (or the lessee of an appropriate long-term lease) may apply for 
a loan; and
    (3) An applicant and the majority of its principals must generally 
have the ability, experience, resources, character, reputation, and 
other qualifications the Program deems necessary for successfully 
operating, utilizing, or carrying out the project and protecting the 
Program's interest; and
    (4) Applicants should apply to the appropriate NMFS Regional 
Financial Services Branch to be considered.
    (b) Application fee. An application fee of 0.5 percent of the 
dollar amount of an application is due when the application is formally 
accepted. Upon submission, 50 percent of the application fee, known as 
the ``filing fee,'' is non-refundable; the remainder, known as the 
``commitment fee,'' may be refunded if the Program declines an 
application or an applicant withdraws its application before the 
Program issues an AIP letter, as described in Sec.  253.13(e). The 
Program will not issue an AIP letter if any of the application fee 
remains unpaid. No portion of the application fee shall be refunded 
once the Program issues an AIP letter.
    (c) False statement. A false statement on an application is grounds 
for denial or termination of funds, grounds for possible punishment by 
a fine or imprisonment as provided in 18 U.S.C. 1001 and an event of a 
security default.


Sec.  253.13  Initial investigation and approval.

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


Sec.  253.14  Loan documents.

    (a) U.S. Note. (1) The U.S. Note will be in the form the Program 
prescribes.
    (2) The U.S. Note evidences the obligor's indebtedness to the 
United States.
    (i) For financing approved after October 11, 1996, the U.S. Note 
evidences the obligor's actual indebtedness to the U.S.; and
    (ii) For financing originating before October 11, 1996, that 
continues to be associated with a Guaranteed Note, the U.S. Note shall 
evidence the obligor's actual indebtedness to the U.S. upon the 
Program's payment of any or all of the sums due under the Guaranteed 
Note or otherwise disbursed on the obligor's behalf.
    (iii) The U.S. Note will, among other things, contain provisions to 
add to its principal balance all amounts the Program advances or 
incurs, including additional interest charges and costs incurred to 
protect its interest or accommodate the obligor.
    (3) The U.S. Note shall be assignable by the Program, at its sole 
discretion.
    (b) Security documents. (1) Each security document will be in the 
form the Program prescribes.

[[Page 78626]]

    (2) The Program will, at a minimum, require the pledge of adequate 
collateral, generally in the form of a security interest or mortgage 
against all property associated with a project or security as otherwise 
required by the Program.
    (3) The Program will require such other security as it deems 
necessary and appropriate, given the circumstances of each obligor and 
the project.
    (4) The security documents will, among other things, contain 
provisions to secure the repayment of all additional amounts the 
Program advances or incurs to protect its interest or accommodate the 
obligor, including additional interest charges and fees.


Sec.  253.15  Recourse against parties.

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


Sec.  253.16  Actual cost.

    Actual cost shall be determined as follows:
    (a) The actual cost of a vessel shall be the sum of:
    (1) The total cost of the project depreciated on a straight-line 
basis, over the project property's useful life, using a 10-percent 
salvage value; and
    (2) The current market value of appurtenant limited access 
privileges or transferable limited access privileges vested in the name 
of the obligor, the subject vessel or their owners, provided that such 
privileges are utilized by or aboard the subject vessel and will be 
pledged as collateral for the subject FFP financing.
    (b) The actual cost of a facility shall be the sum of:
    (1) The total cost of the project, not including land, depreciated 
on a straightline basis over the Project Property's useful life, using 
a 10-percent salvage value;
    (2) The current market value of the land that will be pledged as 
collateral for the subject FFP financing, provided that such land is 
utilized by the facility; and
    (3) The net present value of the payments due under a long term 
lease of land or marine use rights, provided that they meet the 
following requirements:
    (i) The project property must be located at such leased space or 
directly use such marine use rights;
    (ii) Such lease or marine use right must have a duration the 
Program deems sufficient; and
    (iii) The lease or marine use right must be assigned to the Program 
such that the Program may foreclose and transfer such lease to another 
party.
    (c) The actual cost of a transferable limited access privilege 
shall be determined as follows:
    (1) For financing the purchase of limited access privileges, the 
actual cost shall be the purchase cost.
    (2) For refinancing limited access privileges, the actual cost 
shall be the current market value.
    (d) The actual cost of any Project that includes any combination of 
items described in paragraphs (a), (b) or (c) of this section shall be 
the sum of such calculations.


Sec.  253.17  Insurance.

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


Sec.  253.18  Closing.

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


Sec.  253.19  Dual-use CCF.

    The Program may require the pledge of a CCF account or annual 
deposits of some portion of the project property's net income into a 
dual-use CCF. A dual-use CCF provides the normal CCF tax-

[[Page 78627]]

deferral benefits, but also gives the Program control of CCF 
withdrawals, recourse against CCF deposits, ensures an emergency 
refurbishing reserve (tax-deferred) for project property, and provides 
additional collateral.


Sec.  253.20  Fees.

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


Sec.  253.21  Demand by guaranteed noteholder and payment.

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


Sec.  253.22  Program operating guidelines.

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


Sec.  253.23  Default and liquidation.

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


Sec.  253.24  Enforcement violations and adverse actions.

    (a) Compliance with applicable law. All applicants and Program 
participants shall comply with applicable law.
    (b) Applicant disqualification. (1) Any issuance of any citation or 
Notice of Violation and Assessment by NMFS enforcement or other 
enforcement authority may constitute grounds for the Program to:
    (i) Delay application or approval processing;
    (ii) Delay loan closing;
    (iii) Delay disbursement of loan proceeds;
    (iv) Disqualify an applicant or obligor; or
    (v) Declare default.
    (2) The Program will not approve loans or disburse funds to any 
applicant found to have an outstanding, final and unappealable 
fisheries fine or other unresolved penalty until either: Such fine is 
paid or penalty has been resolved; or the applicant enters into an 
agreement to pay the penalty and makes all payments or installments as 
they are due. Failure to pay or resolve any such fine or penalty in a 
reasonable period of time will result in the applicant's 
disqualification.
    (c) Foreclosure in addition to other penalties. In the event that a 
person with an outstanding balance on a Program loan or guarantee 
violates any ownership, lease, use, or other provision of applicable 
law, such person may be subject to foreclosure of property, in addition 
to any fines, sanctions, or other penalties.


Sec.  253.25  Other administrative requirements.

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


Sec.  253.26  Traditional loans.

    (a) Eligible projects. Financing or refinancing up to 80 percent of 
a project's actual cost shall be available to any citizen who is 
determined to be eligible and qualified under the Act and these rules, 
except--
    (1) The Program will not finance the cost of new vessel 
construction.
    (2) The Program will not finance a vessel refurbishing project that 
materially increases an existing vessel's harvesting capacity.
    (b) Financing or refinancing. (1) Projects, other than those 
specified in paragraphs (a) (1) and (a)(2) of this section, may be 
financed, as well as refinanced.

[[Page 78628]]

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


Sec.  253.27  IFQ financing.

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


Sec.  253.28  Halibut sablefish IFQ loans.

    (a) Specific definitions. For the purposes of this section, the 
following definitions apply:
    (1) Entry-level fishermen means fishermen who do not own any IFQ in 
the year they apply for a loan.
    (2) Fishermen who fish from small vessels means fishermen wishing 
to purchase IFQ for use on Category B, Category C, or Category D 
vessels, but who do not own, in whole or in part, any Category A or 
Category B vessels, as such vessels are defined in 50 CFR 679.40(a)(5) 
of this title.
    (3) Halibut sablefish quota share means a halibut or sablefish 
permit, the face amount of which is used as the basis for the annual 
calculation of a person's halibut or sablefish IFQ, also abbreviated as 
``HSQS'' or ``halibut/sablefish QS.''
    (4) Halibut/Sablefish IFQ means the annual catch limit of halibut 
or sablefish that may be harvested by a person who is lawfully 
allocated halibut or sablefish quota share, a harvest privilege for a 
specific portion of the total allowable catch of halibut or sablefish.
    (b) Entry level fishermen. The Program may finance up to 80 percent 
of the cost of purchasing HSQS by an entry level fisherman who:
    (1) Does not own any halibut/sablefish QS during the origination 
year;
    (2) Applies for a loan to purchase a quantity of halibut/sablefish 
QS that is not greater than the equivalent of 8,000 lb. (3,628.7 kg) of 
IFQ during the origination year;
    (3) Possesses the appropriate transfer eligibility documentation 
duly issued by RAM for HSQS;
    (4) Intends to be present aboard the vessel, as may be required by 
applicable regulations; and
    (5) Meets all other Program eligibility, qualification, lending and 
credit requirements.
    (c) Fishermen fishing from small vessels. The Program may finance 
up to 80 percent of the cost of purchasing HSQS by a fisherman who 
fishes from a small vessel, provided that any such fisherman shall:
    (1) Apply for a loan to purchase halibut or sablefish QS for use on 
vessel Categories B, C, or D, as defined under 50 CFR 679.40(a)(5) of 
this title;
    (2) Not own an aggregate quantity of halibut/sablefish QS 
(including the loan QS) of more than the equivalent of 50,000 lb. 
(22,679.6 kg) of IFQ during the origination year;
    (3) Not own, in whole or in part, directly or indirectly (including 
through stock or other ownership interest) any vessel of the type that 
would have been assigned Category A or Category B HSQS under 50 CFR 
679.40(a)(5);
    (4) Possess the appropriate transfer eligibility documentation duly 
issued by the RAM for HSQS;
    (5) Intend to be present aboard the vessel, as may be required by 
applicable regulations, as IFQ associated with halibut/sablefish QS 
fi