Magnuson-Stevens Fishery Conservation and Management Act Provisions; Regional Fishery Management Council Membership; Financial Disclosure and Recusal, 57705-57713 [2018-24905]

Agencies

• DEPARTMENT OF COMMERCE
• National Oceanic and Atmospheric Administration

[Federal Register Volume 83, Number 222 (Friday, November 16, 2018)]
[Proposed Rules]
[Pages 57705-57713]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-24905]


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DEPARTMENT OF COMMERCE

National Oceanic and Atmospheric Administration

50 CFR Part 600

[Docket No. 180212158-8158-01]
RIN 0648-BH73


Magnuson-Stevens Fishery Conservation and Management Act 
Provisions; Regional Fishery Management Council Membership; Financial 
Disclosure and Recusal

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

ACTION: Proposed rule; request for comments.

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SUMMARY: NMFS proposes changes to the regulations that address 
disclosure of financial interests by, and voting recusal of, council 
members appointed by the Secretary of Commerce (Secretary) to the 
regional fishery management councils established under the Magnuson-
Stevens Fishery Conservation and Management Act. The regulatory changes 
are needed to provide guidance to ensure consistency and transparency 
in the calculation of a Council member's financial interests; determine 
whether a close causal link exists between a Council decision and a 
benefit to a Council member's financial interest; and establish 
regional procedures for preparing and issuing recusal determinations. 
This proposed rule is intended to improve regulations implementing the 
statutory requirements governing disclosure of financial interests and 
voting recusal at section 302(j) of the Magnuson-Stevens Fishery 
Conservation and Management Act (Magnuson-Stevens Act).

DATES: Written comments must be received on or before March 6, 2019.

ADDRESSES: You may submit comments on this document, identified by FDMS 
Docket Number NOAA-NMFS-2018-0092, by any of the following methods:
     Electronic Submission: Submit all electronic public 
comments via the Federal e-Rulemaking Portal. Go to 
www.regulations.gov/#!docketDetail;D=NOAA-NMFS-2018-0092, click the 
``Comment Now!'' icon, complete the required fields, and enter or 
attach your comments.
     Fax: 301-713-1175.
     Mail: Submit written comments to Alan Risenhoover, 
Director, Office of Sustainable Fisheries, National Marine Fisheries 
Service, 1315 East-West Highway, SSMC3, Silver Spring, MD 20910. Please 
mark the outside of the envelope ``Financial Disclosure/Recusal.''
    Instructions: Comments sent by any other method, to any other 
address or individual, or received after the end of the comment period, 
may not be considered by NMFS. All comments received are a part of the 
public record and will generally be posted for public viewing on 
www.regulations.gov without change. All personal identifying 
information (for example, name, address, etc.) submitted voluntarily by 
the commenter may be publicly accessible. Do not submit confidential 
business information or otherwise sensitive or protected information. 
NMFS will accept anonymous comments (enter ``N/A'' in the required 
fields if you wish to remain anonymous).
    Electronic copies of NMFS Policy Directive 01-116 Fishery 
Management Council Financial Disclosures and NMFS Procedural Directive 
01-116-01 Procedures for Review of Fishery Management Council Financial 
Disclosures may be obtained at https://www.fisheries.noaa.gov/national/laws-and-policies/fisheries-management-policy-directives.

FOR FURTHER INFORMATION CONTACT: Brian Fredieu, 301-427-8505.

SUPPLEMENTARY INFORMATION: Section 302 of the Magnuson-Stevens Act (16 
U.S.C. 1852) includes provisions for the establishment and 
administration of the regional fishery management councils (Councils). 
Section 302(j) (16 U.S.C. 1852(j)) sets forth the statutory 
requirements for the disclosure of financial interests, and the 
circumstances under which a Council member is prohibited, or recused, 
from voting on a matter before a Council. These requirements apply to 
``affected individuals.'' The Magnuson-Stevens Act defines ``affected 
individual'' at section 302(j)(1)(A) as individuals who are nominated 
by the Governor of a State for appointment as a voting member of a 
Council under section 302(b)(2), and voting members of a Council 
appointed under section 302(b)(2), or (b)(5) if the individual is not 
subject to disclosure and recusal requirements under the laws of an 
Indian tribal government. An affected individual is required to 
disclose any

[[Page 57706]]

financial interest in any harvesting, processing, lobbying, advocacy, 
or marketing activity that is being, or will be, undertaken within a 
fishery over which the Council concerned has jurisdiction or with 
respect to an individual or organization with a financial interest in 
such activity (16 U.S.C. 1852(j)(2)). See also 50 CFR 600.235(a) 
(further defining ``financial interest in harvesting, processing, 
lobbying, advocacy, or marketing activity''). Disclosure is required 
for the above types of financial interests held by that individual; the 
individual's spouse, minor child or partner; or any organization in 
which the individual is serving as an officer, director, trustee, 
partner or employee (16 U.S.C. 1852(j)(2)).
    Regulations implementing the provisions at section 302(j) appear at 
50 CFR 600.235. NMFS also has issued policy and procedural directives 
(see ADDRESSES) to provide additional guidance on the disclosure of 
financial interests and recusal.
    Pursuant to section 305(d) of the Magnuson-Stevens Act (16 U.S.C. 
1855(d)), this proposed rule would modify the regulations at 50 CFR 
600.235 to provide guidance to (1) ensure consistency and transparency 
in the calculation of an affected individual's financial interests; (2) 
determine whether a close causal link exists between a Council decision 
and a benefit to an affected individual's financial interest; and (3) 
establish regional procedures for preparing and issuing recusal 
determinations. This proposed rule also makes several minor 
modifications to the regulations governing financial disclosure. The 
remainder of this preamble provides detailed information on the 
background and application of the recusal regulations, the issues that 
have arisen given the lack of regulations addressing certain aspects of 
recusal, and a detailed description of the regulatory changes being 
proposed to determine when a voting recusal is required and the process 
for issuing recusal determinations.

Background on the Financial Disclosure and Recusal Regulations at 50 
CFR 600.235

    In 1986, the Magnuson-Stevens Act, originally called the Fishery 
Conservation and Management Act, was amended by Public Law 99-659 to 
require voting members and Executive Directors of each Council to 
disclose any financial interest they held in harvesting, processing, or 
marketing of fishery resources under the jurisdiction of their 
respective Council. With passage of the Sustainable Fisheries Act in 
1996 (Pub. L. 104-297), Congress amended the Magnuson-Stevens Act to 
include provisions that prohibit an affected individual from voting on 
Council decisions that would have a significant and predictable effect 
on the individual's disclosed financial interests. Section 302(j)(7) of 
the Magnuson-Stevens Act (16 U.S.C. 1852(j)(7)) includes a substantive 
threshold that requires a voting recusal when met, and procedural 
provisions that apply if an affected individual is prohibited from 
voting on a Council decision. The substantive threshold requires a 
voting recusal when a Council decision would have a ``significant and 
predictable effect'' on an affected individual's disclosed financial 
interests. Section 302(j)(7)(A) states that a council decision is 
considered to have a ``significant and predictable effect'' on a 
financial interest if there is ``a close causal link between the 
Council decision and an expected and substantially disproportionate 
benefit to the financial interests of the affected individual relative 
to the financial interests of other participants in the same gear type 
or sector of the fishery.'' The procedural provisions (1) identify a 
designated official as the person making determinations on whether a 
Council decision would have a significant and predictable effect on an 
affected individual's financial interest (recusal determination), (2) 
allow a Council member to request the Secretary of Commerce's 
(Secretary's) review of a recusal determination, (3) permit an affected 
individual who is recused from voting to state how he or she would have 
voted, and (4) state that any reversal of a recusal determination may 
not be cause for the invalidation or reconsideration of the Council 
decision. Section 302(j)(7)(F) requires NMFS to promulgate regulations 
implementing the provisions of section 302(j)(7).
    In August 1997, NMFS published a proposed rule to implement the new 
voting restriction and procedural provisions at section 302(j)(7) (62 
FR 42474; August 7, 1997). Most relevant to this proposed rulemaking, 
NMFS proposed regulations that implemented the Magnuson-Stevens Act's 
substantive threshold for recusal and defined the phrase ``expected and 
substantially disproportionate benefit''. This definition established a 
10 percent interest threshold in either the total harvest, marketing or 
processing, or ownership of vessels as an indicator of whether an 
affected individual's interest in the fishery was significant enough to 
constitute an expected and substantially disproportionate benefit for 
purposes of recusal determinations. In the proposed rule preamble, NMFS 
explained that it interpreted the statutory term ``benefit'' to include 
both positive and negative impacts on the affected individual's 
financial interests, noting that, ``Avoiding a negative is as 
advantageous as gaining a positive.'' NMFS also explained that the 
choice of a particular percentage as ``indicative of a `significant' 
interest'' was a difficult one. NMFS stated that it was considering ``a 
tiered approach, with different percentage indicators for different-
sized sectors of the fishing industry,'' but that it had been unable to 
develop a workable model and invited suggestions from the public on 
dealing with the issue.
    The proposed regulations also defined the term ``designated 
official'' as ``an attorney designated by the NOAA General Counsel'' 
and included a process for the issuance and review of recusal 
determinations. The proposed regulations did not define the term 
``Council decision,'' provide any formula for calculating harvesting, 
processing, and marketing activity of an affected individual's 
financial interests relative to the 10 percent thresholds, or provide 
any regulatory guidance on how to determine the existence of ``close 
causal link.''
    NMFS received a number of comments on the proposed rule and 
published a final rule implementing the voting recusal provisions in 
November 1998 (63 FR 64182; November 19, 1998). In response to one 
comment, NMFS added a regulatory definition for the term ``Council 
decision.'' Several comments addressed the proposed definition of 
``expected and substantially disproportionate benefit.'' In response to 
one comment, NMFS explained that the agency had focused on the 
comparative aspect of the defined term and emphasized that, ``The 
disqualifying effect is not that the Council action will have a 
significant impact on the member's financial interest; the action must 
have a disproportionate impact as compared with that of other 
participants in the fishery sector.'' Additionally, some commenters 
said the 10 percent thresholds were too high for any fishery; other 
commenters said the 10 percent thresholds were too low for small 
fisheries. NMFS maintained the 10 percent thresholds, and responded 
``While NMFS has no quantitative data on which to base the selection of 
10 percent as the disqualifying industry share, qualitative information 
available from existing disclosure forms and other

[[Page 57707]]

sources indicates that this value would accomplish the Congressional 
intent of disqualifying from voting only those current Council members 
whose financial interests would be disproportionately affected by 
Council actions, in comparison with the financial interests of other 
participants in the fishery sector.'' NMFS received no comments on, and 
made no changes in the final rule to address, the calculation of 
harvesting, processing and marketing activity relative to the 10 
percent thresholds or regulatory guidance on determining the existence 
of ``close causal link.'' The recusal regulations, located at 50 CFR 
600.235, became effective on February 17, 1999.
    No changes were made to the statutory or regulatory provisions 
governing financial disclosure and recusal until January 2007, when the 
Magnuson-Stevens Act was reauthorized (Pub. L. 109-479). The Magnuson-
Stevens Reauthorization Act amended section 302(j) to include advocacy 
and lobbying as types of activities that must be disclosed by affected 
individuals and to require members of each Council's Scientific and 
Statistical Committee to disclose their financial interests. NMFS 
modified the regulations governing disclosure of financial interests 
and recusal to address these changes in 2010 (75 FR 59143, September 
27, 2010). No further amendments to section 302(j) have occurred since 
the Magnuson-Stevens Reauthorization Act and NMFS has made no 
modifications to the financial disclosure and recusal regulations since 
2010.

Agency Application of the Recusal Regulations

    Since the effective date of the recusal regulations in February 
1999, designated officials within the regional offices of the NOAA 
Office of General Counsel have followed and applied the recusal 
regulations and have prepared and issued recusal determinations when 
requested and as necessary for affected individuals within each of the 
Councils. However, because the regulations lack guidance on several key 
aspects of reaching a recusal determination, and provide little 
guidance on the procedures to be followed when preparing and issuing a 
recusal determination, designated officials have developed practice 
principles and interpretations over time to fill in these regulatory 
gaps and to address new factual circumstances that have arisen. The 
following describes the current practice, principles, and 
interpretations that have been used in preparing and issuing recusal 
determinations, which are being either modified or supplemented through 
this rulemaking.

Attribution Principles

    Without a regulatory formula for calculating harvesting, processing 
or marketing activity (i.e., covered activity) and vessel ownership 
relative to the 10 percent thresholds, designated officials have 
applied a ``full attribution'' principle. Under the full attribution 
principle, all covered activity of, and all vessels owned by, a 
financial interest that is wholly or partially owned by an affected 
individual are fully attributed to the affected individual. Percentage 
of ownership has not been a relevant factor under the full attribution 
principle; the determining factor has been that there is some 
percentage of ownership in the financial interest. The full attribution 
principle has also been applied to employment; and to all covered 
activity of, including all vessels owned by, a financial interest that 
employs an affected individual. The full attribution principle also 
extends to financial interests that are wholly or partially owned by an 
affected individual's financial interests.
    A slightly different attribution principle has been applied for 
financial interests that wholly or partially own an affected 
individual's financial interests. A designated official will apply the 
full attribution principle when a financial interest owns fifty percent 
or more of an affected individual's financial interest. However, if a 
financial interest owns less than fifty percent of an affected 
individual's financial interest, then the designated official has not 
attributed to an affected individual any covered activity of, or 
vessels owned by, the financial interest.
    Finally, designated officials have followed certain guidelines in 
applying attribution principles when the financial interest is an 
association or organization, or when a spouse, partner, or minor child 
holds the financial interest. For associations and organizations, 
designated officials have applied the full attribution principle when 
the affected individual's association or organization receives from 
NMFS an allocation of harvesting or processing privileges, owns 
vessels, or is directly engaged in a covered activity. However, if the 
association or organization, as an entity separate from its members, 
does not own any vessels and is not directly engaged in any covered 
activity, designated officials have not attributed to the affected 
individual the covered activity of, or vessel ownership by, the members 
of the association or organization. For spouses, partners, and minor 
children, application of the attribution principle depends on whether 
there is ownership of, or employment with, the financial interest. 
Designated officials apply the full attribution principle and attribute 
to an affected individual all covered activity of, and vessels owned 
by, a financial interest that is wholly or partially owned by a spouse, 
partner, or minor child. Similarly, designated officials have applied 
the full attribution principle and attributed to an affected individual 
all covered activity of, and vessels owned by, a financial interest 
that employs a spouse, partner or minor child when the spouse's, 
partner's, or minor child's compensation is influenced by, or 
fluctuates with, the financial performance of the company. Conversely, 
designated officials have not attributed to an affected individual any 
covered activity of, or vessels owned by, a financial interest that 
employs a spouse, partner or minor child when the spouse's, partner's, 
or minor child's compensation is not influenced by, or fluctuates with, 
the financial performance of the company.

Close Causal Link

    Since implementation of the recusal regulations in 1999, designated 
officials have understood that the Magnuson-Stevens Act and the 
regulations require a voting recusal when there is a close causal link 
between the Council decision and an expected and substantially 
disproportionate benefit to an affected individual's financial interest 
in the fishery or sector of the fishery affected by the Council 
decision relative to other participants and using the most recent 
fishing year for which information is available. However, without any 
regulatory guidance concerning the close causal link requirement, the 
issue has sometimes been subsumed in the determination of whether there 
is an expected and substantially disproportionate benefit.

Process and Procedure for Preparing and Issuing Recusal Determinations

    Regulations at 50 CFR 600.235(f) set forth two paths for initiating 
a recusal determination. First, an affected individual may request a 
recusal determination by notifying the designated official either 
within a reasonable time before the Council meeting at which the 
Council decision will be made or during a Council meeting before a 
Council vote on the decision. Second, a designated official may 
initiate a recusal determination. The designated official may initiate 
based on his or her knowledge of the fishery and the financial 
interests disclosed by an affected individual or

[[Page 57708]]

based on written and signed information received either within a 
reasonable time before a Council meeting or, if the issue could not 
have been anticipated before the meeting, during a Council meeting 
before a Council vote on the decision. Regulations at Sec.  600.235(f) 
also state that the recusal determination will be based upon a review 
of the information contained in the affected individual's financial 
interest form and any other reliable and probative information provided 
in writing and that all information considered will be made part of the 
public record for the decision.
    While the regulations at Sec.  600.235(f) provide some structure 
for the initiation, development, and issuance of a recusal 
determination, they are silent on other important procedural aspects of 
preparing and issuing a recusal determination. For example, the 
regulations do not address: (1) The process by which the designated 
official will make the affected individual, the Council, and the public 
aware of recusal determinations, (2) how and when designated officials 
are identified, or (3) the timing of issuing a recusal determination 
relative to the start of a Council meeting and the request for review 
process. Without additional regulatory guidance concerning the 
procedure for preparing and issuing recusal determinations, regional 
practices have developed to address these gaps.

Concerns With the Recusal Regulations and Need for Action

    Several recent determinations resulting in voting recusals have 
raised concerns among the Regional Fishery Management Councils. In 
April 2015, the NOAA General Counsel received a request for review 
(i.e., appeal) of a recusal determination issued in March 2015 that 
concluded that a voting recusal was required for an affected individual 
on the North Pacific Council. The appeal challenged the use of the full 
attribution approach and argued that the regulations and common 
business practices support using a proportional share, or partial 
attribution, approach to calculating financial interests. Under such an 
approach, an affected individual would be attributed with covered 
activity and vessel ownership commensurate with the affected 
individual's percentage of ownership in the company. The appeal noted 
that the language of the regulations refers to the interests of the 
affected individual and explained that if an affected individual owns 
five percent of a fishing company, then the affected individual only 
receives five percent of the company distributions because the affected 
individual does not have a financial interest in more than five percent 
of the company. According to the appeal, to attribute all activity of a 
partially-owned company unreasonably credits the affected individual 
with more of the financial interest than is actually owned. The appeal 
also argued that in an employment situation, the affected individual 
should only be attributed with a proportional share of the harvesting 
and processing activity of companies that are partially-owned 
subsidiary companies of the affected individual's employer.
    After reviewing the appeal, the NOAA General Counsel upheld the use 
of the full attribution approach, concluding that (1) the term 
``interest'' as used in the recusal regulations is broad and not 
limited solely to direct financial benefit from harvest; (2) that the 
full attribution approach is more consistent with the purpose of the 
Magnuson-Stevens Act and the regulations; and (3) while past practice 
is not necessarily binding, consistency and predictability are 
important for all stakeholders in the fisheries management process.
    After receiving another recusal determination in May 2015 that used 
the full attribution approach, the North Pacific Council submitted a 
letter to NMFS in August 2015, asking NMFS to consider changes to the 
way in which covered activity is calculated. Specifically, the North 
Pacific Council asked NMFS to consider using a proportional share 
approach similar to the approach described in the appeal. Under the 
approach, the designated official would attribute to the affected 
individual the percentage of the company's covered activity that is 
commensurate with the affected individual's ownership percentage. The 
North Pacific Council argued that use of the full attribution approach 
is an ``unfair and illogical interpretation of the recusal regulations, 
and results in unintended recusals of Council members.'' The North 
Pacific Council also stated that it had general concerns with the lack 
of transparency and predictability of the recusal process and asked 
that NMFS provide more clarity and predictability to the process of 
issuing recusal determinations.
    While NMFS was considering the North Pacific Council's requests, 
another determination requiring a voting recusal of an affected 
individual of the North Pacific Council was issued in March 2017. The 
recusal determination applied the full attribution approach and 
determined that a voting recusal was required because the action before 
the North Pacific Council was a Council decision and the affected 
individual's financial interests harvested more than ten percent of the 
total harvest in the affected fishery during the previous fishing year. 
However, the Council decision was a fishery management plan amendment 
that required no implementing regulations. The North Pacific Council 
argued that because the action had no real possibility of affecting the 
affected individual's financial interests, there was no close causal 
link between the Council decision and the expected and substantially 
disproportionate benefit to the affected individual's financial 
interests and no voting recusal should have been required. Around this 
same time, the Western Pacific Council raised similar concerns with 
regard to ``close causal link'' between a benefit and a Council 
decision, and what constituted an ``expected and substantially 
disproportionate benefit'' regarding an affected individual's financial 
interest, especially when the affected individual is an employee of a 
fishing company versus an owner of a fishing company.
    NMFS discussed these concerns with the Council Coordination 
Committee and decided to initiate this rulemaking to address the 
concerns. NMFS tasked a recusal working group, comprised of experts in 
both NMFS and the NOAA Office of General Counsel, to consider whether 
the agency should take any action regarding how the recusal provisions 
should be applied in such circumstances in the future. The group 
considered the attribution principles for recusal determinations and 
sought solutions to clarify the application of the close causal link 
requirement in the Magnuson-Stevens Act. The group also discussed ways 
in which to improve the transparency of regional procedures employed in 
preparing and issuing recusal determinations.

Proposed Changes to the Financial Disclosure and Recusal Regulations

    NMFS proposes to make the following changes to the financial 
disclosure and recusal regulations at Sec.  600.235.

Decision-Making Process for Recusal Determinations

    NMFS proposes regulations that explain the steps to be followed in 
determining whether an affected individual is required to be recused 
from voting. Regulations at 50 CFR 600.235(c)(3) would be modified to 
clarify the multi-part test that is used in making this determination. 
First, the designated official would need to determine if the action 
being taken by a Council is a ``Council decision'' and

[[Page 57709]]

whether an affected individual (i.e., member, spouse, partner, minor 
child) had an interest in the fishery affected by the Council decision. 
If the action before the Council is not a ``Council decision'' or no 
affected individuals have any financial interests in the fishery 
affected by the decision, the designated official's inquiry would end. 
But if the answer to these factors is yes, the designated official 
would then need to examine the next two factors: Whether there is an 
expected and substantially disproportionate benefit to the affected 
individual's financial interests and whether there is a close causal 
link between the Council decision and the expected and substantially 
disproportionate benefit. Under the proposed rule, a designated 
official would be able to decide the order in which these factors are 
examined. If the answer to either of these factors is no, then the 
designated official's inquiry would end and a voting recusal would not 
be required. But if the answer to both of these factors is yes, then a 
voting recusal would be required.

Expected and Substantially Disproportionate Benefit

    NMFS proposes to make minor adjustments to the current regulatory 
definition of ``expected and substantially disproportionate benefit.'' 
One of these changes would be to remove the ten percent recusal 
thresholds from the definition of ``expected and substantially 
disproportionate benefit'' and use them to define the term 
``significant financial interest.''
    NMFS also proposes to add Sec.  600.235(c)(5) to provide guidance 
on determining whether an expected and substantially disproportionate 
benefit exists. This proposed regulation clarifies that an expected and 
substantially disproportionate benefit will be determined to exist if 
an affected individual has a significant financial interest in the 
fishery that is likely to be positively or negatively impacted by the 
Council decision. An affected individual's significant financial 
interest in a fishery indicates that the affected individual will 
experience an expected and substantially disproportionate impact, 
either positive or negative, relative to the financial interests of 
other participants in the fishery. The magnitude of the positive or 
negative impact is not determinative of whether there is an expected 
and substantially disproportionate benefit. NMFS also proposes 
regulatory guidance on how to calculate an affected individual's 
financial interests in order to determine whether the affected 
individual has a significant financial interest, which is described 
later in the preamble.

Close Causal Link

    NMFS proposes to create a definition of close causal link to better 
guide the application of the requirement for causation between a 
Council decision and an expected and substantially disproportionate 
benefit to the financial interests of an affected individual. The 
proposed definition would state that a close causal link means that ``a 
Council decision would reasonably be expected to directly impact or 
affect the financial interests of an affected individual.''
    NMFS also proposes regulatory guidance on determining whether a 
close causal link exists. Due to the nature of Council decisions, NMFS 
concluded that it generally is likely that a close causal link between 
a benefit and a Council decision exists for all Council decisions, 
especially those with implementing regulations, as regulations 
typically impact the public directly in some way. However, NMFS also 
recognizes that there may be instances where no impact would occur or 
where the chain of causation is attenuated. Therefore, NMFS proposes 
exceptions under which a designated official may determine that a close 
causal link does not exist. One proposed exception would be for a 
Council decision affecting a fishery or sector of a fishery in which an 
affected individual has a financial interest but the chain of causation 
between the Council decision and the affected individual's financial 
interest is attenuated or is contingent on the occurrence of events 
that are speculative or that are independent and unrelated to the 
Council decision. The other proposed exception would be for a Council 
decision affecting a fishery or sector of a fishery in which an 
affected individual has a financial interest but there is no real, as 
opposed to speculative, possibility that the Council decision will 
affect the affected individual's financial interest. This proposed 
language provides guidance on how to determine an element of causation 
in those instances where a Council decision is not reasonably expected 
to directly impact or affect the financial interest of an affected 
individual.

Calculating Significant Financial Interest

    In response to the requests for increased transparency and 
predictability, NMFS proposes to amend the regulations to provide 
guidance on the attribution principles to be applied when calculating 
whether an affected individual has a significant financial interest in 
a fishery. The proposed attribution principles address (1) direct 
ownership and employment, (2) indirect ownership, (3) parent ownership, 
(4) financial interests in associations and organizations, and (5) 
financial interests of a spouse, partner, or minor child. The proposed 
attribution principles for parent ownership, associations and 
organizations, and financial interests of a spouse, partner, or minor 
child represent the approach NMFS has been following and would continue 
to follow if this proposed rule is finalized. However, NMFS proposes to 
adopt a partial attribution approach when calculating direct and 
indirect ownership.
    NMFS recognizes a distinction between two different types of 
partial interest: (1) Direct ownership, and (2) indirect ownership 
(i.e., a subsidiary relationship). A direct ownership interest exists 
where a council member (or the member's employer) directly owns some 
interest--whether full ownership or some share--in a particular 
company. An indirect or subsidiary ownership interest exists where a 
company in which the council member (or the member's employer) has a 
direct interest owns a share of another company. NMFS believes the 
direct and indirect ownership situations should be distinguished 
because an individual has a direct interest in, and more control over, 
a company that he or she owns, even if the interest represents a 
partial interest in the company. On the other hand, an individual's 
indirect ownership interest in a subsidiary company is more attenuated. 
Note also that in some cases employees are treated differently than 
owners because an employee cannot be ``partially'' employed by a 
company.
    An affected individual would be considered to have a direct 
ownership interest when the affected individual wholly or partially 
owns, or is employed by, a business, vessel, or other entity (i.e., 
company) reported on the individual's financial interest form. For 
direct ownership, NMFS proposes that a designated official fully 
attribute to an affected individual all covered activity and vessel 
ownership of a company when the affected individual is employed by, or 
owns 50 percent or more of, the company. If the affected individual 
owns less than 50 percent of the company, NMFS proposes that a 
designated official attribute covered activity and vessel ownership 
commensurate with the affected individual's percentage of ownership.

[[Page 57710]]

    In the case of direct ownership, NMFS determined that affected 
individuals owning 50 percent or more of a company should continue to 
be attributed with 100 percent of the covered activity and vessel 
ownership of that company because an individual has a direct interest 
in, and more control over, a company that he or she owns, even if the 
interest represents less than a 100 percent interest in the company. 
NMFS believes that when a Council member owns a controlling interest in 
a company, the member can also control a company's response to any 
particular council decision and the potential for a conflict of 
interest is heightened. Additionally, NMFS determined that an employee 
of a company should continue to be attributed with 100 percent of the 
covered activity and vessel ownership of that company because an 
employee cannot be ``partially'' employed and thus the employee's 
interest is always fully attributed to a company through the nature of 
their employment. However, NMFS determined that a partial attribution 
approach for less than 50 percent direct ownership would more closely 
align the owner's actual ownership interest in a company and better 
reflect the ability to control the company's activities. Therefore NMFS 
proposes to only attribute the proportional level of interest to the 
owner.
    In the case of indirect (or subsidiary) ownership, an affected 
individual would be considered to have an indirect ownership interest 
when the affected individual's company or employer wholly or partially 
owns a company that must be reported on the individual's financial 
interest form. For subsidiary ownership, NMFS proposes to apply a 
partial attribution approach and attribute to the affected individual 
the harvesting, processing, and marketing activity of, and vessels 
owned by, a company that is owned by an affected individual's company 
or employer commensurate with the member's percentage ownership in the 
directly owned company, and the directly owned company's ownership in 
the indirectly owned company. For example, if Jones owns 25 percent of 
Acme, and Acme owns 50 percent of Zenith, then Jones should be 
attributed 12.5 percent of Zenith's activity in an affected fishery. 
NMFS determined that this partial attribution approach better captures 
the attenuated nature of indirect ownership and reflects that an 
affected individual has less control or a more partial interest in the 
activities of a company indirectly owned by the affected individual's 
directly owned company or employer. In any of these cases, the burden 
would be on the Council member to provide reliable information 
concerning partial ownership interests. In the absence of such 
information, a 100 percent interest would be assumed.
    NMFS recognizes that the proposed revisions to the direct and 
indirect attribution principles may not address every situation in 
which an affected individual's interest may seem attenuated. However, 
under the proposed multi-part test for determining whether recusal is 
required, a designated official must specifically determine whether 
there is a close causal link between a council decision and an expected 
and substantially disproportionate benefit to an affected individual's 
financial interests. The proposed guidance on close causal link will 
further address situations where an affected individual's interest is 
attenuated from a Council decision.

Process for Development and Issuance of Recusal Determinations

    In order to increase transparency and to add clarity to the process 
for development and issuance of recusal determinations, NMFS intends to 
require that each NMFS Regional Office, in conjunction with NOAA Office 
of General Counsel, will publish and make available to the public a 
Regional Recusal Determination Procedure Handbook, which explains the 
process and procedure typically followed by the region in preparing and 
issuing recusal determinations. The handbook would include: A statement 
that the Regional Recusal Determination Procedure Handbook is intended 
as guidance to describe the recusal determination process and procedure 
typically followed within the region; identification of the Council(s) 
to which the Regional Recusal Determination Procedure Handbook applies; 
a description of the process for identifying the fishery or sector of 
the fishery affected by the action before the Council; a description of 
the process for preparing and issuing a recusal determination relative 
to the timing of a Council decision; a description of the process by 
which the Council, Council members, and the public will be made aware 
of recusal determinations; and a description of the process for 
identifying the designated official(s) who will prepare recusal 
determinations and attend Council meetings.

Other Proposed Changes

    In addition to the proposed changes described above, NMFS proposes 
to make several minor changes to section 600.235 to provide additional 
clarity to the financial disclosure regulations and guidance concerning 
the length of time Regional Administrators and NMFS Regional Offices 
must retain financial disclosure forms submitted by Council and 
Scientific and Statistical Committee (SSC) members. First, NMFS 
proposes to amend the heading for section 600.235 to include reference 
to recusal. The current heading for section 600.235 only refers to 
financial disclosure but this section has included the recusal 
regulations since 1998. The addition of ``recusal'' to the heading 
would provide clarity as to the subject of the regulations at section 
600.235.
    Second, the proposed rule would modify regulations at 600.235(h) to 
change ``financial disclosure report'' to ``Financial Interest Form'' 
to provide the accurate title of the financial disclosure form when it 
is referenced in the regulations. The proposed modifications would 
provide clarity and consistency in the financial disclosure regulations 
by including an accurate reference to the financial disclosure form.
    Third, the proposed rule would add a new paragraph 600.235(b)(5), 
which would require a Regional Administrator to retain a Council 
member's financial disclosure forms for 20 years from the date the form 
is signed by the Council member, or in accordance with the records 
retention schedule published by the National Archives and Records 
Administration (NARA), and as implemented by NOAA, if the schedule 
requires retention of such forms for longer than 20 years. Currently, 
the financial disclosure regulations do not provide Regional 
Administrators or NMFS Regional Offices with any guidance on the length 
of time a Council member's financial disclosure forms should be 
retained by NMFS. NMFS has determined that financial disclosure forms 
submitted by Council members are important documents worthy of 
retention for 20 years after their submission, or for as long as 
required by NARA. The proposed change would ensure that a Council 
member's financial disclosure forms are available for public inspection 
and agency examination for a sufficient period of time during and 
following the Council member's tenure on a regional fishery management 
council.
    Finally, the proposed rule would make minor clarifying changes 
through proposed Sec.  600.235(b)(8) by changing the phrase ``shall 
maintain on file'' to ``must retain.''

Classification

    The NMFS Assistant Administrator has determined that the proposed 
rule is

[[Page 57711]]

consistent with the Magnuson-Stevens Act, and other applicable law, 
subject to further consideration after public comment.
    This proposed action is significant for the purposes of Executive 
Order 12866.
    The Chief Counsel for Regulation of the Department of Commerce 
certified to the Chief Counsel for Advocacy of the Small Business 
Administration that this proposed rule, if adopted, would not have a 
significant economic impact on a substantial number of small entities. 
This rule regulates only those Council members who have voting 
privileges and are appointed to their position by the Secretary of 
Commerce.
    This proposed rule would modify regulations at 50 CFR 600.235 to 
provide guidance to: (1) Ensure consistency and transparency in the 
calculation of an affected individual's financial interests; (2) 
determine whether a close causal link exists between a Council decision 
and a benefit to an affected individual's financial interest; and (3) 
establish regional procedures for preparing and issuing recusal 
determinations. NMFS invites public comment on whether the changes 
proposed are sufficient and effective in distinguishing the calculation 
of direct ownership, indirect ownership and employment interests; 
whether the proposed language appropriately defines when a close causal 
link exists between a Council decision and a benefit; and whether the 
establishment of regional procedures provides consistency and 
transparency in the preparation and issuance of recusal determinations. 
Specifically, NMFS invites public comment on whether partial 
attribution should extend to cases where the affected individual is an 
employee, a member of an association or organization, a spouse, 
partner, or minor child of a council member, or in cases of parent 
ownership; on whether there are additional circumstances that merit an 
exception from the standard that a close causal link exists for all 
Council decision that require implementing regulations and that affect 
a fishery or sector of a fishery in which an affect individual has a 
financial interest; whether partial attribution appropriately reflects 
the attenuated nature of indirect ownership. NMFS also invites comment 
on whether a 50 percent ownership threshold captures the nature of 
direct ownership, including whether an interest of less than 50 percent 
might in some cases be controlling, but also notes that any subjective 
control test would likely require council members to submit additional 
financial information and would require NMFS to develop a process and 
expertise to analyze control. In accordance with 50 CFR 600.235, 
Council members may be required to recuse themselves from voting on a 
Council decision that would have a significant and predictable effect 
on a disclosed financial interest. This proposed rule would have no 
effect on any small entities, as defined under the Regulatory 
Flexibility Act, 5 U.S.C. 601. As a result, an initial regulatory 
flexibility analysis is not required and none has been prepared.

List of Subjects in 50 CFR Part 600

    Administrative practice and procedure, Confidential business 
information, Fisheries, Fishing, Fishing vessels, Foreign relations, 
Intergovernmental relations, Penalties, Reporting and recordkeeping 
requirements, Statistics.

    Dated: November 8, 2018.
Samuel D. Rauch III,
Deputy Assistant Administrator for Regulatory Programs, National Marine 
Fisheries Service.

    For reasons set out in the preamble, NMFS proposes to amend 50 CFR 
part 600 as follows:

PART 600--MAGNUSON-STEVENS ACT PROVISIONS

0
1. The authority citation for part 600 continues to read as follows:

    Authority: 5 U.S.C. 561 and 16 U.S.C. 1801 et seq.

0
2. In Sec.  600.235:
0
a. Revise the section heading;
0
b. In paragraph (a) add in alphabetical order the definitions for 
``Close causal link,'' ``Expected and substantially disproportionate 
benefit,'' and ``Significant financial interest;''
0
c. Redesignate paragraphs (b)(5) through (b)(7) as paragraphs (b)(6) 
through (b)(8), respectively, add new paragraph (b)(5), and revise 
newly redesignated paragraph (b)(8);
0
d. Revise paragraph (c)(3), redesignate paragraph (c)(4) as (c)(7), and 
add new paragraphs (c)(4), (c)(5), and (c)(6);
0
e. Revise the heading of paragraph (f), (f)(1), and add paragraph 
(f)(6);
0
f. Revise paragraphs (g)(2) and (h).
    The additions and revisions to read as follows:


Sec.  600.235  Financial disclosure and recusal.

    (a) * * *
    Close causal link means that a Council decision would reasonably be 
expected to directly impact or affect the financial interests of an 
affected individual.
* * * * *
    Expected and substantially disproportionate benefit means a 
positive or negative impact with regard to a Council decision that is 
likely to affect a fishery or sector of a fishery in which the affected 
individual has a significant financial interest.
* * * * *
    Significant financial interest means:
    (1) A greater than 10-percent interest in the total harvest of the 
fishery or sector of the fishery affected by the Council decision;
    (2) A greater than 10-percent interest in the marketing or 
processing of the total harvest of the fishery or sector of the fishery 
affected by the Council decision; or
    (3) Full or partial ownership of more than 10 percent of the 
vessels using the same gear type within the fishery or sector of the 
fishery affected by the Council decision.
    (b) * * *
    (5) The Regional Administrator must retain the Financial Interest 
Form for a Council member for 20 years from the date the form is signed 
by the Council member or in accordance with the current NOAA records 
schedule.
* * * * *
    (8) The Regional Administrator must retain the Financial Interest 
Forms of all SSC members for at least five years after the expiration 
of that individual's term on the SSC. Such forms are not subject to 
sections 302(j)(5)(B) and (C) of the Magnuson-Stevens Act.
    (c) * * *
    (3) In making a determination under paragraph (f) of this section 
as to whether a Council decision will have a significant and 
predictable effect on an affected individual's financial interests, the 
designated official will:
    (i) Initially determine whether the action before the Council is a 
Council decision, and whether the affected individual has any financial 
interest in the fishery or sector of the fishery affected by the 
action.
    (ii) If the designated official determines that the action is not a 
Council decision or that the affected individual does not have any 
financial interest in the fishery or sector of the fishery affected by 
the action, the designated official's inquiry ends and the designated 
official will determine that a voting recusal is not required under 50 
CFR 600.235.
    (iii) However, if the designated official determines that the 
action is a Council decision and that the affected individual has a 
financial interest in the fishery or sector of the fishery affected by 
the Council decision, a voting recusal is required under 50 CFR 600.235 
if there is:

[[Page 57712]]

    (A) An expected and substantially disproportionate benefit to the 
affected individual's financial interest (see paragraph (c)(5) of this 
section), and
    (B) A close causal link (see paragraph (c)(4) of this section) 
between the Council decision and the expected and substantially 
disproportionate benefit to the affected individual's financial 
interest.
    (4) Determining close causal link. (i) For all Council decisions 
that require implementing regulations and that affect a fishery or 
sector of a fishery in which an affected individual has a financial 
interest, a close causal link exists unless:
    (A) The chain of causation between the Council decision and the 
affected individual's financial interest is attenuated or is contingent 
on the occurrence of events that are speculative or that are 
independent of and unrelated to the Council decision; or
    (B) There is no real, as opposed to speculative, possibility that 
the Council decision will affect the affected individual's financial 
interest.
    (ii) For Council decisions that do not require implementing 
regulations, a close causal link exists if there is a real, as opposed 
to speculative, possibility that the Council decision will affect the 
affected individual's financial interest.
    (5) Determining expected and substantially disproportionate 
benefit. A designated official will determine that an expected and 
substantially disproportionate benefit exists if an affected individual 
has a significant financial interest (see paragraph (c)(6) of this 
section) in the fishery or sector of the fishery that is likely to be 
positively or negatively affected by the Council decision. The 
magnitude of the positive or negative impact is not determinative of 
whether there is an expected and substantially disproportionate 
benefit. The determining factor is the affected individual's 
significant financial interest in the fishery or sector of the fishery 
affected by the Council decision.
    (6) Calculating significant financial interest--(i) Information to 
be used. (A) The designated official will use the information included 
in the Financial Interest Form and any other reliable and probative 
information provided in writing.
    (B) The designated official may contact an affected individual to 
better understand the reported financial interest or any information 
provided in writing.
    (C) The designated official will presume that the information 
reported on the Financial Interest Form is true and correct and the 
designated official is not responsible for determining the veracity of 
the reported information when preparing a determination under paragraph 
(f) of this section.
    (D) If an affected individual does not provide information 
concerning the specific percentage of ownership of a financial interest 
reported on his or her Financial Interest Form, the designated official 
will attribute all harvesting, processing, or marketing activity of, 
and vessels owned by, the financial interest to the affected 
individual.
    (ii) Attribution principles to be applied when calculating an 
affected individual's financial interests relative to the significant 
financial interest thresholds. The designated official will apply the 
following principles when calculating an affected individual's 
financial interests relative to the significant financial interest 
thresholds for the fishery or sector of the fishery affected by the 
action. For purposes of this paragraph, use of the term ``company'' 
includes any business, vessel, or other entity.
    (A) Direct ownership (companies owned by, or that employ, an 
affected individual). The designated official will attribute to an 
affected individual all harvesting, processing, and marketing activity 
of, and all vessels owned by, a company when the affected individual 
owns 50 percent or more of that company. If an affected individual owns 
less than 50 percent of a company, the designated official will 
attribute to the affected individual the harvesting, processing, and 
marketing activity of, and vessels owned by, the company commensurate 
with the affected individual's percentage of ownership. The designated 
official will attribute to an affected individual all harvesting, 
processing, and marketing activity of, and all vessels owned by, a 
company that employs the affected individual.
    (B) Indirect ownership (companies owned by an affected individual's 
company or employer). The designated official will attribute to the 
affected individual the harvesting, processing, and marketing activity 
of, and vessels owned by, a company that is owned by that affected 
individual's company or employer commensurate with the affected 
individual's percentage ownership in the directly owned company, and 
the directly owned company's ownership in the indirectly owned company.
    (C) Parent ownership (companies that own some percentage of an 
affected individual's company or employer). The designated official 
will attribute to an affected individual all harvesting, processing, 
and marketing activity of, and all vessels owned by, a company that 
owns fifty percent or more of a company that is owned by the affected 
individual or that employs the affected individual. The designated 
official will not attribute to an affected individual the harvesting, 
processing, or marketing activity of, or any vessels owned by, a 
company that owns less than fifty percent of a company that is owned by 
the affected individual or that employs the affected individual.
    (D) Associations and Organizations. An affected individual may be 
employed by or serve, either compensated or unpaid, as an officer, 
director, board member or trustee of an association or organization. 
The designated official will not attribute to the affected individual 
the vessels owned by, or the harvesting, processing, or marketing 
activity conducted by, the members of that association or organization 
if such organization or association, as an entity separate from its 
members, does not own any vessels and is not directly engaged in 
harvesting, processing or marketing. However, if such organization or 
association receives from NMFS an allocation of harvesting or 
processing privileges, owns vessels, or is directly engaged in 
harvesting, processing or marketing, the designated official will 
attribute to the affected individual the vessels owned by, and all 
harvesting, processing, and marketing activity of, that association or 
organization.
    (E) Financial interests of a spouse, partner or minor child--(1) 
Ownership. The designated official will attribute to an affected 
individual all harvesting, processing, and marketing activity of, and 
all vessels owned by, a company when the affected individual's spouse, 
partner or minor child owns 50 percent or more of that company. If an 
affected individual's spouse, partner or minor child owns less than 50 
percent of a company, the designated official will attribute to the 
affected individual the harvesting, processing, and marketing activity 
of, and vessels owned by, the company commensurate with the spouse's, 
partner's or minor child's percentage of ownership.
    (2) Employment. The designated official will not attribute to an 
affected individual the harvesting, processing, or marketing activity 
of, or any vessels owned by, a company that employs the affected 
individual's spouse, partner or minor child when the spouse's, 
partner's or minor child's compensation are not influenced by, or 
fluctuate with, the financial performance of the company. The 
designated official will attribute to an affected individual all 
harvesting, processing, and marketing activity of, and all vessels 
owned by, a company that employs the Council

[[Page 57713]]

member's spouse, partner or minor child when the spouse's, partner's or 
minor child's compensation are influenced by, or fluctuate with, the 
financial performance of the company.
* * * * *
    (f) Process and procedure for determination. (1) At the request of 
an affected individual, and as provided under paragraphs (c)(3) through 
(6), the designated official shall determine for the record whether a 
Council decision would have a significant and predictable effect on 
that individual's financial interest. Unless subject to confidentiality 
requirements, all information considered will be made part of the 
public record for the decision. The affected individual may request a 
determination by notifying the designated official--
    (i) Within a reasonable time before the Council meeting at which 
the Council decision will be made; or
    (ii) During a Council meeting before a Council vote on the 
decision.
* * * * *
    (6) Regional Recusal Determination Procedure Handbook. (i) Each 
NMFS Regional Office, in conjunction with NOAA Office of General 
Counsel, will publish and make available to the public its Regional 
Recusal Determination Procedure Handbook, which explains the process 
and procedure typically followed in preparing and issuing recusal 
determinations.
    (ii) A Regional Recusal Determination Procedure Handbook must 
include:
    (A) A statement that the Regional Recusal Determination Procedure 
Handbook is intended as guidance to describe the recusal determination 
process and procedure typically followed within the region.
    (B) Identification of the Council(s) to which the Regional Recusal 
Determination Procedure Handbook applies. If the Regional Recusal 
Determination Procedure Handbook applies to multiple Councils, any 
procedure that applies to a subset of those Councils should clearly 
identify the Council(s) to which the procedure applies.
    (C) A description of the process for identifying the fishery or 
sector of the fishery affected by the action before the Council.
    (D) A description of the process for preparing and issuing a 
recusal determination relative to the timing of a Council decision.
    (E) A description of the process by which the Council, Council 
members, and the public will be made aware of recusal determinations.
    (F) A description of the process for identifying the designated 
official(s) who will prepare recusal determinations and attend Council 
meetings.
    (iii) A Regional Recusal Determination Procedure Handbook may 
include additional material related to the region's process and 
procedure for recusal determinations not specifically identified in 
paragraph (f)(6)(ii) of this section. A Regional Recusal Determination 
Procedure Handbook may be revised at any time upon agreement by the 
NMFS Regional Office and NOAA Office of General Counsel.
    (g) * * *
    (2) A Council member may request a review of any aspect of the 
recusal determination, including but not limited to, whether the action 
is a Council decision, the description of the fishery or sector of the 
fishery affected by the Council action, the calculation of an affected 
individual's financial interests or the finding of a significant 
financial interest, and the existence of a close causal link. A request 
for review must include a full statement in support of the review, 
including a concise statement as to why the Council member believes 
that the recusal determination is in error and why the designated 
official's determination should be reversed.
* * * * *
    (h) The provisions of 18 U.S.C. 208 regarding conflicts of interest 
do not apply to an affected individual who is a voting member of a 
Council appointed by the Secretary, as described under section 
302(j)(1)(A)(ii) of the Magnuson-Stevens Act, and who is in compliance 
with the requirements of this section for filing a Financial Interest 
Form. The provisions of 18 U.S.C. 208 do not apply to a member of an 
SSC, unless that individual is an officer or employee of the United 
States or is otherwise covered by the requirements of 18 U.S.C. 208.
* * * * *
[FR Doc. 2018-24905 Filed 11-15-18; 8:45 am]
 BILLING CODE 3510-22-P