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, 55137-55141 [2018-23956]

Download as PDF Federal Register / Vol. 83, No. 213 / Friday, November 2, 2018 / Proposed Rules six months, the effective date of the 2017 final rule from July 1, 2019 to January 1, 2019. List of Subjects in 42 CFR Part 10 Biologics, Business and industry, Diseases, Drugs, Health, Health care, Health facilities, Hospitals. Unfunded Mandates Reform Act Section 202(a) of the Unfunded Mandates Reform Act of 1995 requires that agencies prepare a written statement, which includes an assessment of anticipated costs and benefits, before proposing ‘‘any rule that includes any Federal mandate that may result in the expenditure by State, local, and Tribal governments, in the aggregate, or by the private sector, of $100 million or more (adjusted annually for inflation) in any one year.’’ In 2018, that threshold is approximately $150 million. HHS does not expect this rule to exceed the threshold. Executive Order 13132—Federalism Paperwork Reduction Act The Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) requires that OMB approve all collections of information by a Federal agency from the public before they can be implemented. This proposed rule is projected to have no impact on current reporting and recordkeeping burden for manufacturers under the 340B Program. Changes proposed in this rule would result in no new reporting burdens. Comments are welcome on the accuracy of this statement. 16:35 Nov 01, 2018 Jkt 247001 [FR Doc. 2018–24057 Filed 10–31–18; 11:15 am] BILLING CODE 4165–15–P DEPARTMENT OF COMMERCE National Oceanic and Atmospheric Administration 50 CFR Part 253 HHS has reviewed this proposed rule in accordance with Executive Order 13132 regarding federalism, and has determined that it does not have ‘‘federalism implications.’’ This rule would not ‘‘have substantial direct effects on the States, or on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.’’ The proposal to rescind the June 5, 2018 final rule and make the January 5, 2017 final rule effective as of January 1, 2019 would not adversely affect the following family elements: Family safety, family stability, marital commitment; parental rights in the education, nurture, and supervision of their children; family functioning, disposable income or poverty; or the behavior and personal responsibility of youth, as determined under Section 654(c) of the Treasury and General Government Appropriations Act of 1999. HHS invites additional comments on the impact of this proposed rule from affected stakeholders. VerDate Sep<11>2014 Dated: October 26, 2018. George Sigounas, Administrator, Health Resources and Services Administration. Approved: October 30, 2018. Alex M. Azar II, Secretary, Department of Health and Human Services. [Docket No. 180220192–8192–01] RIN 0648–BH82 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 National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce. ACTION: Proposed rule. AGENCY: The NMFS’ Fisheries Finance Program (FFP or Program) proposes to revise the operating rules of the Program and set forth procedures, eligibility criteria, loan terms, and other requirements to add FFP financing to construct fishing vessels or reconstruct fishing vessels in limited access fisheries that are neither overfished or subject to overfishing. NMFS believes that this change will help preserve the economic benefits the nation derives from its commercial fishing fleets. Aging fishing vessels will need to be replaced. This will allow the FFP to play a small role in this process. Additionally, new fishing vessels will provide a safer environment for fishing crews and will be more fuel efficient. The rule provides for controls over the uses of replaced vessels that might otherwise contribute to additional harvesting efforts that could lead to overfishing. Currently, the Program provides loans to purchase, refurbish, or refinance fishing vessels, fish processing facilities, aquaculture facilities and individual fishing quota (IFQ) permits. The program also offers SUMMARY: PO 00000 Frm 00027 Fmt 4702 Sfmt 4702 55137 loans to community development quota (CDQ) groups to borrow for traditional loan purposes. NMFS also recently amended its regulations to add the purchase or refinancing of federally managed harvesting rights in limited access fisheries. DATES: The comment period for this draft rule ends December 17, 2018. ADDRESSES: You may submit comments, identified by NOAA–NMFS–2014–0062, by any one of the following methods: • Electronic Submissions: Submit all electronic public comments via the Federal eRulemaking Portal. Go to www.regulations.gov/#!docketDetail;D= NOAA-NMFS-2014-0062, click the ‘‘Comment Now!’’ icon, complete the required fields and enter or attach your comments. • Fax: 301–713–1305, Attn: Earl Bennett; • Mail: Earl Bennett, Program Leader, FFP, Financial Services Division, NMFS, Attn: F/MB5, 1315 East West Highway, SSMC3, Silver Spring, MD 20910. Instructions: All comments received are a part of the public record and will generally be posted to http:// www.regulations.gov without change. All Personal Identifying Information (for example, name, address, etc.) voluntarily submitted by the commenter may be publicly accessible. Do not submit Confidential Business Information or otherwise sensitive or protected information. Attachments to electronic comments will be accepted in Microsoft Word, Excel, WordPerfect, or Adobe PDF file formats only. FOR FURTHER INFORMATION CONTACT: Earl Bennett, NMFS, Fisheries Finance Program, 301–427–8765. SUPPLEMENTARY INFORMATION: Electronic Access This proposed rule is also accessible at http://www.gpoaccess.gov/fr. Background Since 1997, the FFP has provided direct loans (loan guarantees prior to that) at 2 percentage points above the Treasury borrowing rate. All FFP vessel loans are collateralized by the fishing vessel, and often include additional collateral and/or guarantees. The creditworthiness of borrowers is also examined to ensure their ability to repay the loan. These provide a means of recovery in the event of a payment default. To date, less than one percent of borrowers have defaulted. In 2016, Congress passed section 302 of the Coast Guard Authorization Act of 2015 (the ‘‘Act’’) (Pub. L. 114–120) which included specific authority for E:\FR\FM\02NOP1.SGM 02NOP1 55138 Federal Register / Vol. 83, No. 213 / Friday, November 2, 2018 / Proposed Rules the Program to finance the construction or reconstruction of fishing vessels in a fishery that is managed under a limited access system. (16 U.S.C. Section 1802) This rule is being proposed because of concerns raised by commercial fisheries that private commercial markets improperly evaluate the risk associated with capital needs of the fishing industry, leading to shorter amortization periods and higher interest rates than would support the upfront investment required for new vessel construction. Current FFP regulations prohibit financing the cost of new vessel construction. There was a time when there were many open domestic fisheries. It was deemed important that the program would not add harvesting capacity to unregulated fisheries. Now NMFS is proposing to restrict new vessel construction to fisheries with a limited access system which is consistent with the goal to have sustainable fisheries. This rule, if finalized, removes the prohibition on new vessel construction and reconstruction financing. The rule would also provide the same general loan requirements for new vessel construction that apply to all traditional loans. These changes would have no effect on currently allowed fisheries financing activities, including current traditional loans and the separately authorized Northwest halibut and sablefish quota share (HSQS), Bering Sea and Aleutian Island (BSAI) crab IFQ, and North Pacific CDQ loans except that it would also explicitly state that loans are restricted to fisheries that are subject to managed limited access systems that are neither overfished or subject to overfishing. Other than specifically identified, this rule if implemented would not change any of the existing FFP regulations, requirements or procedures. NMFS specially notes that in response to the industry’s concerns, the FFP does take into consideration the value of permits, quota share or other harvesting rights associated with the project being financed. The value of harvesting rights will be taken into consideration when determining the adequacy of collateral. Vessel Construction and Reconstruction Financing Overview The replacement of aged vessels in managed fisheries will result in the more efficient use of fisheries, promote safety at sea, and improve environmental operations of fishers. Furthermore, recapitalization and modernization of an over-aged fishing fleet goes hand-in-hand with effective fisheries management. VerDate Sep<11>2014 16:35 Nov 01, 2018 Jkt 247001 Based on current loan authority amounts, the rule change would provide the opportunity for a small number of fishers in federally managed limited access fisheries, setting total allowable catch limits, to modernize their operations by building new, replacement vessels, or rebuilding their current vessels. Loans will only be available for projects in fisheries that are in managed limited access systems that are not deemed to be overfished or subject to overfishing. Even though fishing vessels can be replaced, without the benefit of FFP loans, the fishing industry cannot always find the feasible, long-term, fixed-rate financing necessary to make a replacement vessel economically viable. Smaller, one-vessel operators often have a hard time finding adequate financing. Variable interest rates increase the economic uncertainty of fishing operations that are already subject to variations in weather, prices, and total allowable catch. The availability of the FFP will provide some stability in one critical aspect of managing a fishing operation. To ensure the FFP program does not contribute to over-fishing, loans provided for the construction or reconstruction of fishing vessels that increase capacity, not to be confused with increased harvesting, would be provided only where no affected species are overfished or subject to overfishing. As is the current practice, the FFP will notify the fisheries Regional Administrators of a loan application to ensure that it meets the requirements of the fishery(ies) in which the new vessel will participate. Since the new vessel will replace an existing vessel, as explained below, and will fish under the old vessel’s permits, all harvesting must be part of the fisheries management plan. The FFP would not provide financing if the fisheries management plan could not support the harvesting level, regardless of the increased fishing capacity of the new vessel, required for the applicant to be financially viable. NMFS would implement the new vessel construction and reconstruction loans on the same equitable first come, first served basis based on individual qualifications as current loans. That is, the FFP would evaluate each vessel construction or reconstruction project on the basis of its ability, with present permits and entitlements and overall catch limitations, to repay the requested loan. This includes recent fluctuations in the conditions of the fisheries, prices, economics, useful life of the fishing vessel, and financial condition of the borrower. As a result, projections of PO 00000 Frm 00028 Fmt 4702 Sfmt 4702 total allowable catch over time are not useful for evaluating the financial viability of a certain project as it is too speculative. However, present catch limits do provide valuable perspective on the current financial condition of a prospective borrower. If the subject fishery becomes ‘‘deemed to be overfished’’ while the loan application is under consideration, the FFP would cease processing the loan at that point. Applicants need to be mindful that the current application fee of one half of one percent of the amount requested once paid, irrespective of why the Program denies a loan, statutory provisions limit refunds to fifty percent of the fee. The proposed revisions also clarify that NMFS only extends financing in managed fisheries under limited access systems. This rule would also address the issue of what to do with the replaced vessels. While the replaced vessels may be old and in need of modernization, they may retain substantial market value. A borrower may choose from the following options: (a) The replaced vessel will be scrapped, (b) The vessel will continue to operate in a federally-managed fishery under limited access, or (c) The federal fishery endorsement will be permanently cancelled and the vessel will be prohibited from fishing or providing support to fishing activities anywhere in the world; the vessel’s title will also be marked to prohibit the vessel’s transfer to any foreign flag. If the vessel were ever to cease operation in a federally-managed fishery under limited access or is sold, then option (c) would automatically apply. The requirements under these options would have to be completed within four months of the loan closing(s). If the borrower selects option (c), at loan closing the borrower would authorize the Program and the United States Coast Guard to act on the borrower’s behalf to have the fisheries endorsement revoked and have the vessel’s title amended to prohibit a transfer to a foreign flag. In addition, failure to complete any of the tasks outlined in the options above would be considered an event of default under the loan. Vessel Construction Borrowing Opportunities Borrowers would be able to participate in new vessel construction financing in two basic ways: Direct construction financing, or ‘‘take-out’’ financing of private sector construction loans. Direct construction financing—The FFP would provide up to 80 percent of E:\FR\FM\02NOP1.SGM 02NOP1 Federal Register / Vol. 83, No. 213 / Friday, November 2, 2018 / Proposed Rules the cost of financing a new fishing vessel during its construction. The vessel owner would commit 20 percent to the project and keep a reserve of as much as thirty (30) percent of the estimated cost to cover potential cost overruns. Or, in lieu of a reserve account, the vessel owner would be responsible for securing a completion bond or insurance, as approved by the FFP. The program would make periodic payments to the shipyard as key milestones were met as verified by the surveyor reporting to NMFS. This would necessitate the vessel owner closing multiple loans over the construction period—each closing having its own costs—and accruing interest on those loans while the vessel/ partial vessel was still in the yard. Finally, FFP loan commitments would be usable within a five-year period of obligation as long as the applicant remains qualified. The vessel construction project would have to be completed and funded within that time. Project risk faced by the FFP in this option would be higher than take out financing. Take-out financing—The FFP could evaluate a new vessel construction project and, based on that evaluation, make a commitment to refinance nonFFP construction loans after completion of the construction. With the availability of take-out financing, the vessel owner may secure prime-rate construction financing in the private sector. Once the vessel was successfully completed (including sea trials), fully licensed and permitted in its intended fishery and the vessel owner was in compliance with all loan terms, NMFS would disburse funds to the construction financing lender. There would be just one closing, which would refinance up to 80 percent of the eligible costs of construction. Project risk with this option would be relatively low for the FFP. Finally, the Act now specifically allows vessels over 165 feet in length in Pacific Northwest fisheries to be considered for FFP loans. The cost of these vessels is likely to exceed $130 million each. Construction costs of vessels of 300 feet or greater length may exceed $170 million. The FFP authorized lending each year is presently $100 million and is limited by statute to a total outstanding principal balance of $850 million. Comments Requested NMFS seeks comments on this proposed rule, particularly concerning the orderly implementation of the rule, the conditions placed on new vessel construction loans, and the reserve account requirements. NMFS is also VerDate Sep<11>2014 16:35 Nov 01, 2018 Jkt 247001 interested in what time-frames should be expected for the construction of a new fishing vessel of less than 100 feet, or more than 100 feet? Should NMFS solely provide construction financing, or should it consider refinancing private sector construction debt? What are reasonable terms for shipyard performance bonds or insurance on vessel construction? How should the vessel surveyor or engineer, reporting to NMFS, be contracted? Should a replaced vessel be allowed to become a replacement vessel within the same federally managed fishery, a different federally managed fishery, or should it be scrapped altogether in order to qualify for the loan? Transfer to a nonregulated fishery would not be allowed. Over the last 2 years, the average interest rate charged for FFP loans was 4.53 percent. NMFS also specifically seeks comments regarding the industry standard for interest charged for new vessel construction loans. NMFS welcomes comments on these and any related questions regarding financing of new fishing vessels. Changes in the Proposed Rule The general definitions at § 253.10 will revise the definition of ‘‘Project’’ to include construction of a new fishing vessel and adds definitions for ‘‘Vessel construction financing’’ and ‘‘limited access system.’’ Revisions to § 253.16 regarding actual cost, would redesignate and revise paragraph (d) to paragraph (e) and adds new paragraph (d) to provide the basis for determining the actual cost of vessel construction lending. Traditional loans at § 253.26 parts (a) and (b) are revised to include implementing guidance for new vessel construction. A new section, Vessel construction financing, is added as § 253.32 to provide requirements specific to new vessel construction financing. The new section § 253.33 is added to codify NMFS’ policy that all financings shall require participation in managed fisheries with harvest limitation. Moreover, vessel construction and harvesting rights loan participation will be further restricted to federally managed limited access systems. NMFS also made minor changes to correct errors or improve readability that do not affect the substantive provisions of the rule. Classification This proposed rule is published under the authority of, and is consistent with, Chapter 537 of Title 46 of the United States Code and the Magnuson-Stevens Act, as amended. The NMFS Assistant Administrator has determined that this proposed rule is consistent with Chapter PO 00000 Frm 00029 Fmt 4702 Sfmt 4702 55139 537 of Title 46 of the U.S. Code, the Magnuson-Stevens Act, as amended, and other applicable law, subject to further consideration after public comment. In addition to public comment about the proposed rule’s substance, NMFS also seeks public comment on any ambiguity or unnecessary complexity from the language used in this proposed rule. NEPA NMFS has made a preliminary determination that this rule qualifies to be categorically excluded from further NEPA review. This action is consistent with categories of activities identified in CE G7 of the Companion Manual for NOAA Administrative Order 216–6A, and we have identified no extraordinary circumstances that would preclude this categorical exclusion. NMFS is accepting comments and information during the public comment period for the proposed rule relevant to our preliminary categorical exclusion determination. Executive Order 12866 This proposed rule has been determined to be not significant for purposes of Executive Order 12866. This proposed 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 proposed rule, if adopted, would not have a significant economic impact on a substantial number of small entities. The Regulatory Flexibility Act (RFA), 5 U.S.C. 601, et seq., requires that, whenever an agency is required by section 553 of this title (5 U.S.C. 553), or any other law, to publish general notice of proposed rulemaking for any proposed rule, or publishes a notice of proposed rulemaking for an interpretative rule involving the internal revenue laws of the United States, the agency shall prepare and make available for public comment an initial regulatory flexibility analysis. Such analysis shall describe the impact of the proposed rule on small entities. 5 U.S.C. 603(a). However, where an agency can certify that the rule will not, if promulgated, have a significant economic impact on a substantial number of small entities then an agency need not undertake a full regulatory flexibility analysis. 5 U.S.C. 605(b). E:\FR\FM\02NOP1.SGM 02NOP1 55140 Federal Register / Vol. 83, No. 213 / Friday, November 2, 2018 / Proposed Rules Participation in the FFP is entirely voluntary. This action imposes no mandatory requirements on any business. If finalized, this proposed rule would implement programs authorized by law. Specifically, this rule would create a new lending purpose authorized by the Act and would be implemented in accordance with 50 CFR part 253, subpart B. This action will create new § 253.32 and amend several other sections. As defined by NMFS for RFA purposes, this rule may affect small fishing entities that have annual revenues of $11.0 million or less, including, but not limited to, vessel owners, vessel operators, individual fishermen, small corporations, and others engaged in commercial fishing activities regulated by NMFS. Borrowers under this authority may also include large businesses. Notably, because the FFP is a voluntary program that provides loans to qualified borrowers, non-borrowers—large or small—would not be regulated by this rule. Although the FFP requires certain supporting documentation during the life of a loan, the requirements do not impose unusual burdens when compared to the burdens imposed by other lenders. Moreover, because the basic need for financing would continue to exist without the FFP, the individuals seeking financing would still need to comply with similar, if not identical, requirements imposed by another lender. Records required to participate in the FFP are usually within the normal records already maintained by fishermen. It should take no more than eight hours per application to meet these requirements. The information required from borrowers, such as income tax returns, insurance policies, permits, licenses, etc., is already available to them. Depending on circumstances, the FFP may require other supporting documents, including financial statements, property descriptions, and other documents that can be acquired at reasonable cost if they are not already available. FFP lending is a source of long-term, fixed rate capital financing and imposes no regulatory requirements on anyone other than those applying for loans. FFP borrowers make a voluntary decision to use the available lending. These loan programs will only have positive impacts on borrowers. Because participation is voluntary and requires effort and the outlay of an application fee, borrowers for harvesting rights financing are assumed to have made a determination that using FFP financing provides a benefit, such that the FFP’s VerDate Sep<11>2014 16:35 Nov 01, 2018 Jkt 247001 long-term, fixed rate financing provides only a positive economic impact. Importantly, the FFP does not regulate or manage the affairs of its borrowers, and the regulations impose no additional compliance, operating or other fees or costs on small entities other than those that a financing relationship would require. Because this rule would not have a significant economic effect on a substantial number of small entities, an initial regulatory flexibility analysis is not required and none has been prepared. Paperwork Reduction Act This proposed 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 Number 0648–0012 (loan application). The public reporting burden for the FFP financing is estimated to average no more than 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 email 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, Financial assistance, Fisheries, Fishing, Individual fishing quota. Dated: October 29, 2018. Samuel D. Rauch III, Deputy Assistant Administrator for Regulatory Programs, National Marine Fisheries Service. For the reasons set out in the preamble, 50 CFR part 253 is proposed to be amended as follows: PART 253—FISHERIES ASSISTANCE PROGRAMS 1. The authority citation for part 253 continues to read as follows: ■ Authority: 46 U.S.C. 53701 and 16 U.S.C. 4101 et seq. 2. Amend § 253.10 by: a. Revising the definition for subparagraph (1) under ‘‘Project’’, ■ b. Adding the definitions for ‘‘limited access system’’ and ‘‘Vessel construction financing’’ in alphabetical order. ■ ■ PO 00000 Frm 00030 Fmt 4702 Sfmt 4702 The revisions and additions read as follows: § 253.10 General definitions. * * * * * Project means: (1) The financing or refinancing of the 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; * * * * * Limited access system has the same meaning given to that term in section three of the Magnuson-Stevens Fishery Conservation and Management Act (16 U.S.C. 1802.) Vessel construction financing means either financing the ongoing construction of a new vessel from its inception through completion, including successful sea trials, or refinancing up to 80 percent of the cost of the construction of a new vessel upon the completion of such construction and successful vessel sea trails. * * * * * ■ 3. In § 253.16 redesignate and revise paragraph (d) as paragraph (e) and add new paragraph (d) to read as follows: § 253.16 Actual cost. * * * * * (d) The actual cost of a vessel which is the subject of vessel construction financing shall be determined as follows: (1) The initial actual cost shall be the estimated eligible costs of the construction; and (2) The final actual cost shall be the total final documented eligible costs of the completed construction. (e) The actual cost of any Project that includes any combination of items described in paragraphs (a), (b), (c) or (d) of this section shall be the sum of such calculations. ■ 4. Revise § 253.26 paragraphs (a) and (b) to read as follows: § 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. (b) Financing or refinancing. (1) Projects may be financed, as well as refinanced. (2) The Program may finance the construction cost of a Vessel or Facility E:\FR\FM\02NOP1.SGM 02NOP1 Federal Register / Vol. 83, No. 213 / Friday, November 2, 2018 / Proposed Rules or refinance the construction cost of a Vessel or Facility that has already been financed (or otherwise paid) prior to the submission of a loan application. (3) The Program may finance the refurbishing cost of a Vessel or Facility or refinance the refurbishing cost of a Vessel or Facility that 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. * * * * * ■ 5. Add § 253.32 to read as follows: § 253.32 Vessel construction financing. (a) Project Performance and Completion. The program, in the case of financing the ongoing construction of a new vessel will require a bond, insurance or reserve fund to protect against cost overruns and/or failure of the borrower to complete vessel construction in an amount up to thirty (30) percent of estimated construction cost. The amount and form of such protection shall be determined in the sole discretion of the Program. All costs associated with such protection shall be paid by the borrower. In the case of Vessel construction financing that only involves Program funding after the completion of vessel construction and sea trials, this section is not applicable. (b) Vessel Surveyor. The program, in the case of financing the ongoing construction of a new vessel, will VerDate Sep<11>2014 16:35 Nov 01, 2018 Jkt 247001 require the borrower to secure a vessel surveyor or naval architect for the period of vessel construction. The surveyor will report on the vessel’s progress through construction and represent the Program’s interest. All costs associated with such services shall be paid by the borrower. In the case of Vessel construction financing that only involves Program funding after the completion of vessel construction and sea trials, this section is not applicable. (c) Replaced Vessel. The vessel to be replaced by the new vessel must be named at the time of loan application. The replaced vessel: (1) Must be scrapped, (2) Continues to operate in a federallymanaged fishery under limited access, or (3) Must have its federal fishery endorsement permanently cancelled and the vessel is permanently prohibited from fishing or providing support to fishing activities anywhere in the world; and the vessel’s title is marked to prohibit the vessel’s transfer to any foreign flag. If the vessel were ever to cease operation in a federallymanaged fishery under limited access or is sold, then option (c) would automatically apply. This requirement must be completed within four (4) months from the closing of the financing. The borrower will authorize the Program and the United States Coast Guard Vessel Documentation Center to act on the borrower’s behalf to make the vessel title changes if this requirement is not completed within the four (4) month requirement. Failure to comply PO 00000 Frm 00031 Fmt 4702 Sfmt 9990 55141 with this requirement shall be an event of default under the loan. (d) Multiple loans. In the case of financing the ongoing construction of a vessel, the Program may have to close multiple loans to meet shipyard payment demands or use an escrow account to hold funds. All costs, including but not limited to escrow fees, loan interest and quarterly payments, associated with either option shall be paid by the borrower. (e) Limited Access Fisheries. All vessels constructed under this authority must be used only in a federally managed limited access system that is not deemed to be overfished or subject to overfishing. ■ 6. Add § 253.33 to read as follows: § 253.33 Managed Fisheries Requirement. (a) All financings shall require participation in managed fisheries with harvest limitations, and (b) For vessel construction and harvesting rights loans, participation is further restricted to federally managed limited access systems that are not deemed to be overfished or subject to overfishing. (c) The FFP will cease processing a loan application at any point during the process including at closing if the subject fishery is moved to an ‘‘overfished’’ or ‘‘subject to overfishing’’ category. Refunds of the application fee of one half of one percent of the amount requested once paid, irrespective of why the program denies a loan, are limited to 50 percent of the fee. [FR Doc. 2018–23956 Filed 11–1–18; 8:45 am] BILLING CODE 3510–22–P E:\FR\FM\02NOP1.SGM 02NOP1

Agencies

[Federal Register Volume 83, Number 213 (Friday, November 2, 2018)]
[Proposed Rules]
[Pages 55137-55141]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-23956]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF COMMERCE

National Oceanic and Atmospheric Administration

50 CFR Part 253

[Docket No. 180220192-8192-01]
RIN 0648-BH82


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: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: The NMFS' Fisheries Finance Program (FFP or Program) proposes 
to revise the operating rules of the Program and set forth procedures, 
eligibility criteria, loan terms, and other requirements to add FFP 
financing to construct fishing vessels or reconstruct fishing vessels 
in limited access fisheries that are neither overfished or subject to 
overfishing. NMFS believes that this change will help preserve the 
economic benefits the nation derives from its commercial fishing 
fleets. Aging fishing vessels will need to be replaced. This will allow 
the FFP to play a small role in this process. Additionally, new fishing 
vessels will provide a safer environment for fishing crews and will be 
more fuel efficient. The rule provides for controls over the uses of 
replaced vessels that might otherwise contribute to additional 
harvesting efforts that could lead to overfishing. Currently, the 
Program provides loans to purchase, refurbish, or refinance fishing 
vessels, fish processing facilities, aquaculture facilities and 
individual fishing quota (IFQ) permits. The program also offers loans 
to community development quota (CDQ) groups to borrow for traditional 
loan purposes. NMFS also recently amended its regulations to add the 
purchase or refinancing of federally managed harvesting rights in 
limited access fisheries.

DATES: The comment period for this draft rule ends December 17, 2018.

ADDRESSES: You may submit comments, identified by NOAA-NMFS-2014-0062, 
by any one of the following methods:
     Electronic Submissions: Submit all electronic public 
comments via the Federal eRulemaking Portal. Go to www.regulations.gov/#!docketDetail;D=NOAA-NMFS-2014-0062, click the ``Comment Now!'' icon, 
complete the required fields and enter or attach your comments.
     Fax: 301-713-1305, Attn: Earl Bennett;
     Mail: Earl Bennett, Program Leader, FFP, Financial 
Services Division, NMFS, Attn: F/MB5, 1315 East West Highway, SSMC3, 
Silver Spring, MD 20910.
    Instructions: All comments received are a part of the public record 
and will generally be posted to http://www.regulations.gov without 
change. All Personal Identifying Information (for example, name, 
address, etc.) voluntarily submitted by the commenter may be publicly 
accessible. Do not submit Confidential Business Information or 
otherwise sensitive or protected information. Attachments to electronic 
comments will be accepted in Microsoft Word, Excel, WordPerfect, or 
Adobe PDF file formats only.

FOR FURTHER INFORMATION CONTACT: Earl Bennett, NMFS, Fisheries Finance 
Program, 301-427-8765.

SUPPLEMENTARY INFORMATION: 

Electronic Access

    This proposed rule is also accessible at http://www.gpoaccess.gov/fr.

Background

    Since 1997, the FFP has provided direct loans (loan guarantees 
prior to that) at 2 percentage points above the Treasury borrowing 
rate. All FFP vessel loans are collateralized by the fishing vessel, 
and often include additional collateral and/or guarantees. The 
creditworthiness of borrowers is also examined to ensure their ability 
to repay the loan. These provide a means of recovery in the event of a 
payment default. To date, less than one percent of borrowers have 
defaulted.
    In 2016, Congress passed section 302 of the Coast Guard 
Authorization Act of 2015 (the ``Act'') (Pub. L. 114-120) which 
included specific authority for

[[Page 55138]]

the Program to finance the construction or reconstruction of fishing 
vessels in a fishery that is managed under a limited access system. (16 
U.S.C. Section 1802)
    This rule is being proposed because of concerns raised by 
commercial fisheries that private commercial markets improperly 
evaluate the risk associated with capital needs of the fishing 
industry, leading to shorter amortization periods and higher interest 
rates than would support the upfront investment required for new vessel 
construction. Current FFP regulations prohibit financing the cost of 
new vessel construction. There was a time when there were many open 
domestic fisheries. It was deemed important that the program would not 
add harvesting capacity to unregulated fisheries. Now NMFS is proposing 
to restrict new vessel construction to fisheries with a limited access 
system which is consistent with the goal to have sustainable fisheries.
    This rule, if finalized, removes the prohibition on new vessel 
construction and reconstruction financing. The rule would also provide 
the same general loan requirements for new vessel construction that 
apply to all traditional loans. These changes would have no effect on 
currently allowed fisheries financing activities, including current 
traditional loans and the separately authorized Northwest halibut and 
sablefish quota share (HSQS), Bering Sea and Aleutian Island (BSAI) 
crab IFQ, and North Pacific CDQ loans except that it would also 
explicitly state that loans are restricted to fisheries that are 
subject to managed limited access systems that are neither overfished 
or subject to overfishing.
    Other than specifically identified, this rule if implemented would 
not change any of the existing FFP regulations, requirements or 
procedures.
    NMFS specially notes that in response to the industry's concerns, 
the FFP does take into consideration the value of permits, quota share 
or other harvesting rights associated with the project being financed. 
The value of harvesting rights will be taken into consideration when 
determining the adequacy of collateral.

Vessel Construction and Reconstruction Financing Overview

    The replacement of aged vessels in managed fisheries will result in 
the more efficient use of fisheries, promote safety at sea, and improve 
environmental operations of fishers. Furthermore, recapitalization and 
modernization of an over-aged fishing fleet goes hand-in-hand with 
effective fisheries management.
    Based on current loan authority amounts, the rule change would 
provide the opportunity for a small number of fishers in federally 
managed limited access fisheries, setting total allowable catch limits, 
to modernize their operations by building new, replacement vessels, or 
rebuilding their current vessels. Loans will only be available for 
projects in fisheries that are in managed limited access systems that 
are not deemed to be overfished or subject to overfishing.
    Even though fishing vessels can be replaced, without the benefit of 
FFP loans, the fishing industry cannot always find the feasible, long-
term, fixed-rate financing necessary to make a replacement vessel 
economically viable. Smaller, one-vessel operators often have a hard 
time finding adequate financing. Variable interest rates increase the 
economic uncertainty of fishing operations that are already subject to 
variations in weather, prices, and total allowable catch. The 
availability of the FFP will provide some stability in one critical 
aspect of managing a fishing operation.
    To ensure the FFP program does not contribute to over-fishing, 
loans provided for the construction or reconstruction of fishing 
vessels that increase capacity, not to be confused with increased 
harvesting, would be provided only where no affected species are 
overfished or subject to overfishing.
    As is the current practice, the FFP will notify the fisheries 
Regional Administrators of a loan application to ensure that it meets 
the requirements of the fishery(ies) in which the new vessel will 
participate. Since the new vessel will replace an existing vessel, as 
explained below, and will fish under the old vessel's permits, all 
harvesting must be part of the fisheries management plan. The FFP would 
not provide financing if the fisheries management plan could not 
support the harvesting level, regardless of the increased fishing 
capacity of the new vessel, required for the applicant to be 
financially viable.
    NMFS would implement the new vessel construction and reconstruction 
loans on the same equitable first come, first served basis based on 
individual qualifications as current loans. That is, the FFP would 
evaluate each vessel construction or reconstruction project on the 
basis of its ability, with present permits and entitlements and overall 
catch limitations, to repay the requested loan. This includes recent 
fluctuations in the conditions of the fisheries, prices, economics, 
useful life of the fishing vessel, and financial condition of the 
borrower. As a result, projections of total allowable catch over time 
are not useful for evaluating the financial viability of a certain 
project as it is too speculative. However, present catch limits do 
provide valuable perspective on the current financial condition of a 
prospective borrower. If the subject fishery becomes ``deemed to be 
overfished'' while the loan application is under consideration, the FFP 
would cease processing the loan at that point. Applicants need to be 
mindful that the current application fee of one half of one percent of 
the amount requested once paid, irrespective of why the Program denies 
a loan, statutory provisions limit refunds to fifty percent of the fee. 
The proposed revisions also clarify that NMFS only extends financing in 
managed fisheries under limited access systems.
    This rule would also address the issue of what to do with the 
replaced vessels. While the replaced vessels may be old and in need of 
modernization, they may retain substantial market value. A borrower may 
choose from the following options:
    (a) The replaced vessel will be scrapped,
    (b) The vessel will continue to operate in a federally-managed 
fishery under limited access, or
    (c) The federal fishery endorsement will be permanently cancelled 
and the vessel will be prohibited from fishing or providing support to 
fishing activities anywhere in the world; the vessel's title will also 
be marked to prohibit the vessel's transfer to any foreign flag. If the 
vessel were ever to cease operation in a federally-managed fishery 
under limited access or is sold, then option (c) would automatically 
apply.
    The requirements under these options would have to be completed 
within four months of the loan closing(s). If the borrower selects 
option (c), at loan closing the borrower would authorize the Program 
and the United States Coast Guard to act on the borrower's behalf to 
have the fisheries endorsement revoked and have the vessel's title 
amended to prohibit a transfer to a foreign flag. In addition, failure 
to complete any of the tasks outlined in the options above would be 
considered an event of default under the loan.

Vessel Construction Borrowing Opportunities

    Borrowers would be able to participate in new vessel construction 
financing in two basic ways: Direct construction financing, or ``take-
out'' financing of private sector construction loans.
    Direct construction financing--The FFP would provide up to 80 
percent of

[[Page 55139]]

the cost of financing a new fishing vessel during its construction. The 
vessel owner would commit 20 percent to the project and keep a reserve 
of as much as thirty (30) percent of the estimated cost to cover 
potential cost overruns. Or, in lieu of a reserve account, the vessel 
owner would be responsible for securing a completion bond or insurance, 
as approved by the FFP. The program would make periodic payments to the 
shipyard as key milestones were met as verified by the surveyor 
reporting to NMFS. This would necessitate the vessel owner closing 
multiple loans over the construction period--each closing having its 
own costs--and accruing interest on those loans while the vessel/
partial vessel was still in the yard. Finally, FFP loan commitments 
would be usable within a five-year period of obligation as long as the 
applicant remains qualified. The vessel construction project would have 
to be completed and funded within that time. Project risk faced by the 
FFP in this option would be higher than take out financing.
    Take-out financing--The FFP could evaluate a new vessel 
construction project and, based on that evaluation, make a commitment 
to refinance non-FFP construction loans after completion of the 
construction. With the availability of take-out financing, the vessel 
owner may secure prime-rate construction financing in the private 
sector. Once the vessel was successfully completed (including sea 
trials), fully licensed and permitted in its intended fishery and the 
vessel owner was in compliance with all loan terms, NMFS would disburse 
funds to the construction financing lender. There would be just one 
closing, which would refinance up to 80 percent of the eligible costs 
of construction. Project risk with this option would be relatively low 
for the FFP.
    Finally, the Act now specifically allows vessels over 165 feet in 
length in Pacific Northwest fisheries to be considered for FFP loans. 
The cost of these vessels is likely to exceed $130 million each. 
Construction costs of vessels of 300 feet or greater length may exceed 
$170 million. The FFP authorized lending each year is presently $100 
million and is limited by statute to a total outstanding principal 
balance of $850 million.

Comments Requested

    NMFS seeks comments on this proposed rule, particularly concerning 
the orderly implementation of the rule, the conditions placed on new 
vessel construction loans, and the reserve account requirements. NMFS 
is also interested in what time-frames should be expected for the 
construction of a new fishing vessel of less than 100 feet, or more 
than 100 feet? Should NMFS solely provide construction financing, or 
should it consider refinancing private sector construction debt? What 
are reasonable terms for shipyard performance bonds or insurance on 
vessel construction? How should the vessel surveyor or engineer, 
reporting to NMFS, be contracted? Should a replaced vessel be allowed 
to become a replacement vessel within the same federally managed 
fishery, a different federally managed fishery, or should it be 
scrapped altogether in order to qualify for the loan? Transfer to a 
non-regulated fishery would not be allowed.
    Over the last 2 years, the average interest rate charged for FFP 
loans was 4.53 percent. NMFS also specifically seeks comments regarding 
the industry standard for interest charged for new vessel construction 
loans.
    NMFS welcomes comments on these and any related questions regarding 
financing of new fishing vessels.

Changes in the Proposed Rule

    The general definitions at Sec.  253.10 will revise the definition 
of ``Project'' to include construction of a new fishing vessel and adds 
definitions for ``Vessel construction financing'' and ``limited access 
system.'' Revisions to Sec.  253.16 regarding actual cost, would 
redesignate and revise paragraph (d) to paragraph (e) and adds new 
paragraph (d) to provide the basis for determining the actual cost of 
vessel construction lending. Traditional loans at Sec.  253.26 parts 
(a) and (b) are revised to include implementing guidance for new vessel 
construction. A new section, Vessel construction financing, is added as 
Sec.  253.32 to provide requirements specific to new vessel 
construction financing. The new section Sec.  253.33 is added to codify 
NMFS' policy that all financings shall require participation in managed 
fisheries with harvest limitation. Moreover, vessel construction and 
harvesting rights loan participation will be further restricted to 
federally managed limited access systems. NMFS also made minor changes 
to correct errors or improve readability that do not affect the 
substantive provisions of the rule.

Classification

    This proposed rule is published under the authority of, and is 
consistent with, Chapter 537 of Title 46 of the United States Code and 
the Magnuson-Stevens Act, as amended. The NMFS Assistant Administrator 
has determined that this proposed rule is consistent with Chapter 537 
of Title 46 of the U.S. Code, the Magnuson-Stevens Act, as amended, and 
other applicable law, subject to further consideration after public 
comment.
    In addition to public comment about the proposed rule's substance, 
NMFS also seeks public comment on any ambiguity or unnecessary 
complexity from the language used in this proposed rule.

NEPA

    NMFS has made a preliminary determination that this rule qualifies 
to be categorically excluded from further NEPA review. This action is 
consistent with categories of activities identified in CE G7 of the 
Companion Manual for NOAA Administrative Order 216-6A, and we have 
identified no extraordinary circumstances that would preclude this 
categorical exclusion. NMFS is accepting comments and information 
during the public comment period for the proposed rule relevant to our 
preliminary categorical exclusion determination.

Executive Order 12866

    This proposed rule has been determined to be not significant for 
purposes of Executive Order 12866.
    This proposed 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 proposed rule, if adopted, would not 
have a significant economic impact on a substantial number of small 
entities.
    The Regulatory Flexibility Act (RFA), 5 U.S.C. 601, et seq., 
requires that, whenever an agency is required by section 553 of this 
title (5 U.S.C. 553), or any other law, to publish general notice of 
proposed rulemaking for any proposed rule, or publishes a notice of 
proposed rulemaking for an interpretative rule involving the internal 
revenue laws of the United States, the agency shall prepare and make 
available for public comment an initial regulatory flexibility 
analysis. Such analysis shall describe the impact of the proposed rule 
on small entities. 5 U.S.C. 603(a). However, where an agency can 
certify that the rule will not, if promulgated, have a significant 
economic impact on a substantial number of small entities then an 
agency need not undertake a full regulatory flexibility analysis. 5 
U.S.C. 605(b).

[[Page 55140]]

    Participation in the FFP is entirely voluntary. This action imposes 
no mandatory requirements on any business. If finalized, this proposed 
rule would implement programs authorized by law. Specifically, this 
rule would create a new lending purpose authorized by the Act and would 
be implemented in accordance with 50 CFR part 253, subpart B. This 
action will create new Sec.  253.32 and amend several other sections.
    As defined by NMFS for RFA purposes, this rule may affect small 
fishing entities that have annual revenues of $11.0 million or less, 
including, but not limited to, vessel owners, vessel operators, 
individual fishermen, small corporations, and others engaged in 
commercial fishing activities regulated by NMFS. Borrowers under this 
authority may also include large businesses. Notably, because the FFP 
is a voluntary program that provides loans to qualified borrowers, non-
borrowers--large or small--would not be regulated by this rule.
    Although the FFP requires certain supporting documentation during 
the life of a loan, the requirements do not impose unusual burdens when 
compared to the burdens imposed by other lenders. Moreover, because the 
basic need for financing would continue to exist without the FFP, the 
individuals seeking financing would still need to comply with similar, 
if not identical, requirements imposed by another lender. Records 
required to participate in the FFP are usually within the normal 
records already maintained by fishermen. It should take no more than 
eight hours per application to meet these requirements.
    The information required from borrowers, such as income tax 
returns, insurance policies, permits, licenses, etc., is already 
available to them. Depending on circumstances, the FFP may require 
other supporting documents, including financial statements, property 
descriptions, and other documents that can be acquired at reasonable 
cost if they are not already available.
    FFP lending is a source of long-term, fixed rate capital financing 
and imposes no regulatory requirements on anyone other than those 
applying for loans. FFP borrowers make a voluntary decision to use the 
available lending.
    These loan programs will only have positive impacts on borrowers. 
Because participation is voluntary and requires effort and the outlay 
of an application fee, borrowers for harvesting rights financing are 
assumed to have made a determination that using FFP financing provides 
a benefit, such that the FFP's long-term, fixed rate financing provides 
only a positive economic impact. Importantly, the FFP does not regulate 
or manage the affairs of its borrowers, and the regulations impose no 
additional compliance, operating or other fees or costs on small 
entities other than those that a financing relationship would require.
    Because this rule would not have a significant economic effect on a 
substantial number of small entities, an initial regulatory flexibility 
analysis is not required and none has been prepared.

Paperwork Reduction Act

    This proposed 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 Number 0648-0012 (loan application). The public 
reporting burden for the FFP financing is estimated to average no more 
than 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 
email to [email protected], or fax to 202-395-7285.

List of Subjects in 50 CFR Part 253

    Aquaculture, Community development groups, Direct lending, 
Financial assistance, Fisheries, Fishing, Individual fishing quota.

    Dated: October 29, 2018.
Samuel D. Rauch III,
Deputy Assistant Administrator for Regulatory Programs, National Marine 
Fisheries Service.

    For the reasons set out in the preamble, 50 CFR part 253 is 
proposed to be amended as follows:

PART 253--FISHERIES ASSISTANCE PROGRAMS

0
 1. The authority citation for part 253 continues to read as follows:

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

0
 2. Amend Sec.  253.10 by:
0
a. Revising the definition for subparagraph (1) under ``Project'',
0
b. Adding the definitions for ``limited access system'' and ``Vessel 
construction financing'' in alphabetical order.
    The revisions and additions read as follows:


Sec.  253.10  General definitions.

* * * * *
    Project means:
    (1) The financing or refinancing of the 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;
* * * * *
    Limited access system has the same meaning given to that term in 
section three of the Magnuson-Stevens Fishery Conservation and 
Management Act (16 U.S.C. 1802.)
    Vessel construction financing means either financing the ongoing 
construction of a new vessel from its inception through completion, 
including successful sea trials, or refinancing up to 80 percent of the 
cost of the construction of a new vessel upon the completion of such 
construction and successful vessel sea trails.
* * * * *
0
 3. In Sec.  253.16 redesignate and revise paragraph (d) as paragraph 
(e) and add new paragraph (d) to read as follows:


Sec.  253.16   Actual cost.

* * * * *
    (d) The actual cost of a vessel which is the subject of vessel 
construction financing shall be determined as follows:
    (1) The initial actual cost shall be the estimated eligible costs 
of the construction; and
    (2) The final actual cost shall be the total final documented 
eligible costs of the completed construction.
    (e) The actual cost of any Project that includes any combination of 
items described in paragraphs (a), (b), (c) or (d) of this section 
shall be the sum of such calculations.
0
 4. Revise Sec.  253.26 paragraphs (a) and (b) to read as follows:


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.
    (b) Financing or refinancing.
    (1) Projects may be financed, as well as refinanced.
    (2) The Program may finance the construction cost of a Vessel or 
Facility

[[Page 55141]]

or refinance the construction cost of a Vessel or Facility that has 
already been financed (or otherwise paid) prior to the submission of a 
loan application.
    (3) The Program may finance the refurbishing cost of a Vessel or 
Facility or refinance the refurbishing cost of a Vessel or Facility 
that 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.
* * * * *
0
5. Add Sec.  253.32 to read as follows:


Sec.  253.32  Vessel construction financing.

    (a) Project Performance and Completion. The program, in the case of 
financing the ongoing construction of a new vessel will require a bond, 
insurance or reserve fund to protect against cost overruns and/or 
failure of the borrower to complete vessel construction in an amount up 
to thirty (30) percent of estimated construction cost. The amount and 
form of such protection shall be determined in the sole discretion of 
the Program. All costs associated with such protection shall be paid by 
the borrower. In the case of Vessel construction financing that only 
involves Program funding after the completion of vessel construction 
and sea trials, this section is not applicable.
    (b) Vessel Surveyor. The program, in the case of financing the 
ongoing construction of a new vessel, will require the borrower to 
secure a vessel surveyor or naval architect for the period of vessel 
construction. The surveyor will report on the vessel's progress through 
construction and represent the Program's interest. All costs associated 
with such services shall be paid by the borrower. In the case of Vessel 
construction financing that only involves Program funding after the 
completion of vessel construction and sea trials, this section is not 
applicable.
    (c) Replaced Vessel. The vessel to be replaced by the new vessel 
must be named at the time of loan application. The replaced vessel:
    (1) Must be scrapped,
    (2) Continues to operate in a federally-managed fishery under 
limited access, or
    (3) Must have its federal fishery endorsement permanently cancelled 
and the vessel is permanently prohibited from fishing or providing 
support to fishing activities anywhere in the world; and the vessel's 
title is marked to prohibit the vessel's transfer to any foreign flag. 
If the vessel were ever to cease operation in a federally-managed 
fishery under limited access or is sold, then option (c) would 
automatically apply. This requirement must be completed within four (4) 
months from the closing of the financing. The borrower will authorize 
the Program and the United States Coast Guard Vessel Documentation 
Center to act on the borrower's behalf to make the vessel title changes 
if this requirement is not completed within the four (4) month 
requirement. Failure to comply with this requirement shall be an event 
of default under the loan.
    (d) Multiple loans. In the case of financing the ongoing 
construction of a vessel, the Program may have to close multiple loans 
to meet shipyard payment demands or use an escrow account to hold 
funds. All costs, including but not limited to escrow fees, loan 
interest and quarterly payments, associated with either option shall be 
paid by the borrower.
    (e) Limited Access Fisheries. All vessels constructed under this 
authority must be used only in a federally managed limited access 
system that is not deemed to be overfished or subject to overfishing.
0
6. Add Sec.  253.33 to read as follows:


Sec.  253.33  Managed Fisheries Requirement.

    (a) All financings shall require participation in managed fisheries 
with harvest limitations, and
    (b) For vessel construction and harvesting rights loans, 
participation is further restricted to federally managed limited access 
systems that are not deemed to be overfished or subject to overfishing.
    (c) The FFP will cease processing a loan application at any point 
during the process including at closing if the subject fishery is moved 
to an ``overfished'' or ``subject to overfishing'' category. Refunds of 
the application fee of one half of one percent of the amount requested 
once paid, irrespective of why the program denies a loan, are limited 
to 50 percent of the fee.

[FR Doc. 2018-23956 Filed 11-1-18; 8:45 am]
 BILLING CODE 3510-22-P