Magnuson-Stevens Fishery Conservation and Management Act Provisions; Regional Fishery Management Council Membership; Financial Disclosure and Recusal, 56177-56184 [2020-20019]

Agencies

• DEPARTMENT OF COMMERCE
• National Oceanic and Atmospheric Administration

[Federal Register Volume 85, Number 177 (Friday, September 11, 2020)]
[Rules and Regulations]
[Pages 56177-56184]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-20019]


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DEPARTMENT OF COMMERCE

National Oceanic and Atmospheric Administration

50 CFR Part 600

[Docket No. 200-903-0233]
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: Final rule.

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SUMMARY: NMFS is taking final action to amend 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 will provide guidance to (1) ensure consistency and 
transparency in the calculation of a

[[Page 56178]]

Council member's financial interests; (2) determine whether a close 
causal link exists between a Council decision and a benefit to a 
Council member's financial interest; and (3) establish regional 
procedures for preparing and issuing recusal determinations. This final 
rule will improve implementation of 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: The final rule will be effective October 13, 2020.

FOR FURTHER INFORMATION CONTACT: Brian Fredieu, National Marine 
Fisheries Service, Headquarters: 301-427-8578 or 
[email protected].

SUPPLEMENTARY INFORMATION:

Background

    In November 2018, NMFS published a proposed rule to amend the 
financial disclosure and recusal regulations. See 83 FR 57705 (November 
16, 2018). The proposed rule sought to 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. The proposed rule also sought to make several minor 
modifications to the regulations governing financial disclosure. The 
preamble of the proposed rule provided substantial 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 and rationale of 
the regulatory changes being proposed to determine when a voting 
recusal is required and the process for issuing recusal determinations. 
See 83 FR 57705-57713 (November 16, 2018).
    NMFS invited public comment on whether the changes in the proposed 
rule were 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 invited 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 decisions that require implementing regulations and that affect 
a fishery or sector of a fishery in which an affected individual has a 
financial interest; whether partial attribution appropriately reflects 
the attenuated nature of indirect ownership. NMFS also invited 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, and noted 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.

Changes From the Proposed Rule

    NMFS modifies the proposed regulations at 50 CFR 
600.235(c)(6)(ii)(A) and at Sec.  600.235(c)(6)(ii)(E)(1) to remove the 
50 percent ownership threshold for full attribution and apply the 
partial attribution principle for direct ownership regardless of the 
percentage ownership held by an affected individual or an affected 
individual's spouse, partner, or minor child. NMFS' rationale for these 
changes is provided in the response to Comment 3.

Responses to Public Comments

    NMFS received four public comments during the comment period on the 
proposed rule. Three of those were from the New England, North Pacific, 
and Western Pacific Regional Fishery Management Councils and one was 
from a private citizen. Most commenters made multiple comments in one 
document. Comments were generally in favor of the changes made in the 
proposed rule but some expressed concerns over certain provisions. The 
specific comments and our responses are as follows.
    Comment 1: The New England Fishery Management Council (NEFMC) 
requested that NMFS provide guidance on when a financial interest in a 
lobbying or advocacy organization should lead to a voting recusal. The 
NEFMC noted that because ``significant financial interest'' is defined 
solely on the basis of harvesting, processing, marketing, and vessel 
ownership, an affected individual with a financial interest in a 
lobbying or advocacy organization is unlikely to ever have a 
significant financial interest that leads to recusal. The Magnuson-
Stevens Act does not exempt lobbying and advocacy organizations from 
the possibility of recusal and gives NMFS the authority to develop 
appropriate regulations to define such conduct.
    Response: Section 302(j)(7) states that an affected individual 
required to disclose a financial interest under section 302(j)(2) must 
not vote on a Council decision that would have a significant and 
predictable effect on such financial interest. Section 302(j)(7) also 
states that a Council decision will be 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 interest of the 
affected individual relative to the financial interests of other 
participants in the same gear type or sector of the fishery affected by 
the Council decision.
    Section 302(j)(7) was originally added to the Magnuson-Stevens Act 
with the Sustainable Fisheries Act of 1996 (SFA) (Pub. L. 104-297). 
Section 302(j)(7)(F) directed NMFS to promulgate regulations which 
prohibit an affected individual from voting on Council decisions that 
would have a significant and predictable effect on the affected 
individual's financial interests. NMFS published a proposed rule in 
August 1997 (62 FR 42474; August 7, 1997) and a final rule in November 
1998 (63 FR 64182; November 19, 1998).
    At the time NMFS was developing the 1997 proposed rule, section 
302(j)(2) did not include the terms ``lobbying'' or ``advocacy'' as 
types of financial interests that must be disclosed. However, NMFS 
required, and still requires, disclosure of a financial interest in an 
association that provides representational services (such as lobbying 
and advocacy) for those involved with the fishery, such as fishermen 
and processors. NMFS recognized that many affected individuals had 
these types of financial interests and that NMFS would have to 
determine whether the significant and predictable effect standard for 
voting recusal applied to these affected individuals.
    As NMFS explained in the preamble of the 1997 proposed rule, 
``Affected individuals who have financial interests in businesses or 
not-for-profit organizations closely related to harvesting, processing, 
or marketing activities are covered by section 302(j)

[[Page 56179]]

of the Magnuson-Stevens Act and must disclose those interests. Examples 
are . . . business or economic consultants to the fishing industry . . 
. . Because the effects of Council decisions on this type of financial 
interest are unlikely to be `significant or predictable,' we do not 
foresee recusals by such individuals under Sec.  600.235(c) . . . .'' 
(see 42476 at 62 FR 42474; August 7, 1997). The preamble went on to 
specifically address affected individuals who are employed by or 
represent associations of fishermen, processors, or dealers stating, 
``[These affected individuals] would be required to disclose, in 
addition to his/her own interests, the financial interests of the 
association in harvesting, processing, or marketing activities that are 
or will be undertaken within any fishery under the jurisdiction of his 
or her Council.'' Most importantly, NMFS then stated the following: 
``The financial interests of the association would be considered as 
separate from the financial interests of its individual members. A vote 
taken on a Council decision that might have a significant and 
predictable effect on the members of the association would not be 
considered to have a significant and predictable effect on the 
financial interests of the representative.'' (Emphasis added.)
    In the preamble to the 1998 final rule, NMFS further explained its 
rationale in its responses to Comments 3 and 4 (see 63 FR 64182, 64183; 
November 19, 1998). Comment 3 stated that the 1997 proposed rule was 
overly broad in that it required affected individuals to disclose 
financial interests in industries related to, but not directly involved 
in, fishing, processing or marketing. NMFS disagreed with the comment, 
stating, ``NMFS has long interpreted section 302(j)(2) to require 
affected individuals to disclose financial interests in activities 
related to harvesting, processing, or marketing. If NMFS had read the 
financial-disclosure provision as narrowly as [the commenter] suggests, 
many Council members such as fisheries association officers would have 
been subject to criminal liability under 18 U.S.C. 208. They would have 
been unable to even participate in Council deliberations on issues 
affecting their employment or other fiduciary interests. NMFS believes 
Congress intended . . . to allow persons with financial interest in 
activities related to harvesting, processing, or marketing to continue 
serving on Councils on the same footing as persons with more direct 
interests. The `price' of this participation was the disclosure of 
those interests, so that the public could be informed of possible 
biases by members affiliated with certain sectors of the fishing 
industry.'' (Emphasis in original.) Comment 4 perceived an 
inconsistency in the 1997 proposed rule between the broad scope of 
disclosure and the narrow scope of financial interests that would 
disqualify an affected individual from voting. The commenter stated 
that the disqualifying interests should be broadened to match the 
disclosed interests so that representatives of fishing industry 
associations would be subject to the recusal provisions at 302(j)(7). 
NMFS disagreed with the comment, stating, ``The legislative history . . 
. indicates that Congress was concerned about members who votes on 
Council actions might result in direct gain or loss to themselves or 
their companies. The SFA disqualifies members from voting on decisions 
that would have a `significant and predictable effect' on their 
financial interests. That phrase was defined as `a close causal link 
between the Council decision and an expected and substantially 
disproportionate benefit to the financial interest of the affected 
individual relative to the financial interests of other participants in 
the same gear type or sector of the fishery.' In developing the [1997] 
proposed rule, and again in considering the final rule, NMFS focused on 
the comparative aspect of the defined term. 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. Therefore, the criteria for recusal are limited to persons 
whose financial interests are directly linked to harvesting, 
processing, or marketing activities.''
    Although the Magnuson-Stevens Act was amended in 2006 by the 
Magnuson-Stevens Reauthorization Act (Pub. L. 109-479) to add the terms 
``lobbying'' and ``advocacy'' to section 302(j)(2), the recusal 
standard set forth in section 302(j)(7) remained the same. Therefore, 
NMFS continues to adhere to its originally stated positions: (1) That 
the financial interests of the association are separate from the 
financial interests of its individual members, and a vote taken on a 
Council decision that might have a significant and predictable effect 
on the members of the association is not considered to have a 
significant and predictable effect on the financial interests of the 
representative; and (2) that because the significant and predictable 
effect standard requires a disproportionate impact as compared with 
that of other participants in the fishery sector, the criteria for 
recusal continue to be limited to persons whose financial interests are 
directly linked to harvesting, processing, or marketing activities. 
This final rule amends the regulations at 50 CFR 600.235(c) to add a 
new paragraph Sec.  600.235(c)(6)(D), which provides guidance on 
calculating a significant financial interest for an affected individual 
who is employed by, or who may serve as an officer, director, board 
member, or trustee of, an association or organization related to 
harvesting, processing, or marketing.
    Comment 2: The North Pacific Fishery Management Council (NPFMC) 
requested that NMFS provide additional clarification as to how indirect 
employment (such as consultants) is considered in the determination of 
significant financial interest. The NPFMC contended that there is an 
apparent inconsistency in NMFS attributing all fishing activity to the 
affected individual when he or she is an employee of a company, but not 
attributing to an affected individual who is a director of an 
association or organization any of the fishing activity of the 
association's or organization's members, particularly when that 
association or organization may have been explicitly formed to 
influence council decisions and whose director's annual compensation 
may be directly related to council decisions.
    Response: The proposed and final rules do not use the term 
``indirect employment.'' An affected individual who has employment with 
a business that provides representational services for clients who are 
involved in the harvesting, processing, or marketing of fisheries under 
the jurisdiction of the Council, such as a consultant, must disclose 
that financial interest under the Magnuson-Stevens Act and the 
regulations. This final rule amends Sec.  600.235(c) to add a new 
paragraph Sec.  600.235(c)(6)(D), which provides guidance on 
calculating a significant financial interest for an affected individual 
who is employed by a business or organization that provides consulting 
services for persons directly involved in harvesting, processing, or 
marketing. New paragraph Sec.  600.235(c)(6)(D) reflects NMFS' long-
held position that an affected individual's financial interest in an 
association, or a consulting business, are separate from the financial 
interests of its individual members or clients, and that the 
significant and predictable standard set forth in section 302(j)(7), 
which requires a disproportionate impact as compared with that of other 
participants in the fishery sector for

[[Page 56180]]

voting disqualification, dictates that the criteria for recusal must be 
limited to persons whose financial interests are directly linked to 
harvesting, processing, or marketing activities in the fishery affected 
by the Council decision. With respect to the concern about the director 
or other employee of an association or organization whose compensation 
may be directly related to Council decisions, a detailed explanation of 
NMFS's position as it relates to this regulation is provided in the 
response to Comment 4. However, we note that a director or other 
employee of such an association or organization who serves as a Council 
member and compensation may be directly linked to certain Council 
outcomes may be subject to the restrictions set forth in 50 CFR 
600.225(b)(9). This provision provides that ``no Council member may 
participate personally and substantially as a member . . . in a 
particular matter in which the member . . . has a financial interest.'' 
This provision implements the prohibitions contained in the criminal 
conflict of interest statute found at 18 U.S.C. 208. Council members 
who may have a financial interest in a particular matter should consult 
with the appropriate designated official to determine whether their 
participation in that matter would raise concerns under 50 CFR 600.225.
    Comment 3: The NPFMC disagreed with the provision in the proposed 
rule that would attribute all (i.e., 100 percent) of a company's 
fishing activity to a Council member when the Council member directly 
owns 50 percent or more of that company. The NPFMC stated that this 
provision ignores complex ownership and management arrangements of many 
Alaska fishing companies (e.g., CDQ and family owned companies), and 
incorrectly equates a majority ownership with having a different level 
of financial interest than a minority ownership (i.e., a direct 
ownership interest in a company that is less than 50 percent). As an 
alternative, the NPFMC recommended that NMFS proportionately attribute 
fishing activity to a Council member based on his or her percentage of 
direct ownership in a company.
    Response: NMFS considered the comment and agrees that the 
regulations should proportionately attribute fishing activity to an 
affected individual based on his or her percentage of direct ownership 
in a company. With this final rule, NMFS modifies the proposed 
regulations at 50 CFR 600.235(c)(6)(ii)(A) and Sec.  
600.235(c)(6)(ii)(E)(1) to remove the 50 percent ownership threshold 
for full attribution and apply the partial attribution principle for 
direct ownership regardless of the percentage ownership held by an 
affected individual or an affected individual's spouse, partner or 
minor child. As a result of this change, an affected individual will 
only be attributed 100 percent of a company's harvesting, processing 
and marketing activity if the affected individual or his or her spouse, 
partner or minor child directly owns 100 percent of that company. If an 
affected individual or his or her spouse, partner or minor child 
directly owns something less than 100 percent of a company, NMFS will 
attribute harvesting, processing and marketing activity to the affected 
individual commensurate with the percentage of direct ownership.
    As was explained in the proposed rule preamble, individual NPFMC 
members and the NPFMC as a whole have objected to NMFS's practice of 
fully attributing all fishing activity of a company to an affected 
individual when the affected individual directly owns something less 
than 100 percent of that fishing company. The arguments against full 
attribution and for partial attribution in a partial ownership 
situation have focused on consistency with common business practices, 
promoting fairness, and avoiding unintended results that can increase 
the likelihood of voting recusals. The NPFMC and some of its members 
have explained that common business practices support using a 
proportional share, or partial attribution, approach because an 
affected individual who owns five percent of a fishing company only 
receives five percent of the company's distributions. If an affected 
individual owns only five percent of the company, attribution of all of 
the company's fishing activity unreasonably and unfairly credits the 
affected individual with a greater financial interest in the company 
than is actually owned. Crediting an affected individual with a greater 
financial interest than is actually owned increases the chance of 
determining a voting recusal is required even though the affected 
individual's actual financial interest in the fishery may not represent 
a significant interest in the affected fishery if the individual's true 
ownership and activity level is considered. The NPFMC has 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.''
    NMFS was aware of the NPFMC's arguments for partial attribution 
when it proposed continuing full attribution for an affected individual 
who directly owns 50 percent or more of a company. NMFS proposed the 50 
percent threshold for full versus partial attribution as a mid-point on 
the attribution continuum, with full attribution regardless of 
percentage ownership at one end and attribution based on actual 
percentage of direct ownership at the other end. NMFS specifically 
asked the public for comments on this aspect of the proposed rule and 
purposely described the NPFMC's position on this aspect of the proposed 
rule in the preamble to indicate to, and inform, the public that the 
NPFMC and some of its members had strongly held opinions on this aspect 
of the proposed rule. However, NMFS did not receive any comments (1) 
supporting the proposed 50 percent direct ownership threshold for 
partial versus full attribution; (2) requesting that NMFS continue its 
past practice of full attribution regardless of percentage ownership; 
or (3) criticizing the attribution approach advocated by the NPFMC or 
advocating for a different attribution approach than the one proposed 
by NMFS.
    In the proposed rule preamble, NMFS stated that the proposed 50 
percent threshold for full versus partial attribution stemmed from the 
agency's concern that an affected individual who owns 50 percent or 
more of a company would have more control over the actions of the 
company, and therefore should be attributed with all of the company's 
harvesting, processing, and marketing activity. However, NMFS 
recognizes that ``control'' of a company is an elusive factor on which 
to base recusal determinations. Additionally, NMFS recognizes that 
``control'' of a company can come in ways other than percentage of 
direct ownership and is not necessarily tied solely to an ownership 
percentage. NMFS also recognizes that it does not have the tools or the 
time to conduct investigations of an affected individual's possible 
``control'' over a company in preparing recusal determinations. NMFS 
also re-examined its proposed attribution position for direct ownership 
relative to its proposed attribution position for indirect, or 
subsidiary, ownership. While ``control'' could exist with a high 
percentage ownership of a subsidiary company, NMFS proposed partial 
attribution regardless of percentage owned for indirect ownership.
    NMFS agrees that partial attribution proportional to a Council 
member's percentage of direct and indirect company ownership more 
closely reflects common business practices, promotes fairness, and 
avoids

[[Page 56181]]

unintended results that can increase the likelihood of voting recusals. 
For the reasons stated above, NMFS agrees with the comment and has 
modified proposed regulations at 50 CFR 600.235(c)(6)(ii)(A) with this 
final rule.
    Although the NPFMC's comment focused on direct ownership by an 
affected individual, NMFS' decision to make changes based upon that 
comment also has applicability to the proposed attribution principle 
for direct ownership by a spouse, partner or minor child at 50 CFR 
600.235(c)(6)(ii)(E)(1). In developing the proposed rule, NMFS 
determined that the attribution principle applicable to direct 
ownership by an affected individual should be the same as the 
attribution principle applicable to direct ownership by an affected 
individual's spouse, partner or minor child. Therefore, the proposed 
regulatory text at Sec.  600.235(c)(6)(ii)(E)(1) mirrored the proposed 
regulatory text at Sec.  600.235(c)(6)(ii)(A).
    NMFS received no comments suggesting that different attribution 
principles for direct ownership should apply to an affected individual 
versus the affected individual's spouse, partner or minor child, and 
determined that its proposed policy of applying the same attribution 
principle should continue. In keeping with that policy, NMFS modifies 
50 CFR 600.235(c)(6)(ii)(E)(1) to remove the 50 percent ownership 
threshold for full attribution and apply the partial attribution 
principle for direct ownership regardless of the percentage ownership 
held by an affected individual's spouse, partner, or minor child.
    Comment 4: One comment noted that a Council member can own up to 49 
percent of a company without meeting the threshold for recusal. The 
commenter noted, however, an employee of that same company would be 
attributed 100 percent ownership and be subject to recusal. The 
commenter wrote that an employee does not have legal control over a 
company and should not be held to a higher standard than that of a 
minority owner and if attribution is to be applied to employees, the 
proposed rule must further define categories of employment (officer, 
director, etc.) and compensation (commission, bonus, shareholder, etc.) 
that would lead to significant and direct financial benefit to 
employees as a result of management actions.
    Response: NMFS recognizes that there is a range of employee-
employer relationships and compensation models. For example, employees 
may be officers or directors with significant financial interest in the 
employer, or they may be hourly wage employees, with no other financial 
interest. NMFS also recognizes that employees do not necessarily have 
control over their employers' interests or actions. However, NMFS does 
not have the discretion to consider only situations where there would 
be a significant and direct financial benefit to employees as a result 
of a fishery management council action. In the case of an employee, the 
Act requires disclosure of any financial interest held by both the 
individual and any organization in which the individual is serving as 
an employee. The recusal requirement specifically relates to both of 
those financial interests--that is, an affected individual may not vote 
on a Council decision that would have a significant and predictable 
effect on the financial interest of either the employer or the 
employee. The Act does not allow us to consider the nature of 
employment or the type of compensation when making recusal 
determinations.
    Comment 5: The NEFMC commented that there should be guidance 
specifying when recusal determinations will be made and how quickly 
action will be taken on a request for review. Additionally, the NEFMC 
commented that the recusal process and the regional handbook should be 
developed and modified in consultation with the Council.
    Response: NMFS agrees that there should be specific guidance on 
when recusal determinations are made and the timeline for review of 
those determinations. The NMFS Policy Directive 01-116 states that it 
is the policy of NMFS to carry out the responsibilities of the 
Secretary pursuant to section 302(j) of the MSA and implementing 
regulations to provide an effective process for submission and review 
of financial disclosures and for resolving any conflicts of interest by 
Council members. That policy includes implementing the process in this 
final rule. NMFS will require that each NMFS Regional Office, in 
conjunction with the NOAA Office of General Counsel, publish and make 
publicly available a Regional Recusal Determination Procedure Handbook. 
As reflected in the final rule, the handbook would include, among other 
items: 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.
    As referenced in the NMFS Policy Directive 01-116, the Councils, 
specifically the Council Executive Directors, are responsible for 
reviewing the submission of financial disclosures, advising the NMFS 
Regional Administrator and NOAA General Counsel Regional Section if 
there are discrepancies, and reviewing disclosures prior to meetings as 
well as recording any incidences of recusals for reporting purposes. 
The Councils are integral in assisting NMFS in the implementation of 
section 302(j) of the MSA. NMFS intends to include the Councils in 
reviewing the Regional Recusal Determination Procedure Handbooks prior 
to final publication and in any subsequent review of those Handbooks.
    Comment 6: The NEFMC commented that the proposed rule language 
updating the ``close causal link'' definition is very subjective and 
provides little guidance to Council members or the designated official 
preparing the determination. They commented that this will lead to 
endless debates over whether a relationship is real or speculative. 
They recommended the inclusion of examples as is done in some 
regulations (e.g., 5 CFR 2635.402(b)(1)) may help clarify this issue. 
Another commenter noted that the proposed rule states that there is no 
close causal link where the affected individuals' financial interest is 
attenuated or is contingent on the occurrence of events that are 
speculative. This commenter noted that these terms are ambiguous, and 
if construed broadly, problematic, thus leaving room for non-recusal 
based on no more than a plausible claim that there is some speculative, 
contingent event standing between a council regulation and its effect 
on an affected individuals' financial interest.
    Response: Section 302(j)(7)(A) of the MSA 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. As noted in the proposed rule, 
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. Without any regulatory guidance

[[Page 56182]]

concerning the close causal link requirement NMFS proposed 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. Contrary to the idea that there would be 
endless debates on whether a relationship is real or speculative, NMFS 
concluded that generally a close causal link between a benefit and a 
Council decision exists for all Council decisions, especially those 
with implementing regulations. However, NMFS also recognizes that there 
may be rare instances where no impact would occur or where the chain of 
causation is attenuated. The final rule acknowledges this, stating that 
a causal link does not exist if there is ``no real, as opposed to 
speculative, possibility that the Council decision will affect the 
affected individual's financial interest.'' The concept of a financial 
benefit being ``real, as opposed to speculative'' is necessarily 
subjective as it is based upon the facts of the matter before a 
designated official, including the type and subject of a Council 
decision at hand and the category of interest disclosed by a voting 
Council member. Furthermore, interpretation of the phrase, ``real, as 
opposed to speculative'' can be found in both current federal conflict 
of interest law and in the concept of causation in other areas of law. 
For example, the primary federal conflict of interest statute, 18 
U.S.C. 208, requires a disqualification of a government employee in a 
matter in which the employee, the employee's family or connected 
organization has a financial interest and the matter in which the 
employee would be involved has a real possibility of affecting those 
interests. The regulations of the Office of Governmental Ethics 
explains that a matter will have a direct effect on a financial 
interest if there is a close causal link between any decision or action 
to be taken in the matter and any expected effect, further noting that 
the chain of causation must not be ``attenuated'' or ``contingent upon 
the occurrence of events that are speculative or that are independent 
of . . . the matter''. See 5 CFR 2635.402. Here, the term 
``speculative'' does not describe a type of event, as one commenter 
noted, but rather the probability that a link between the Council 
decision and whether a substantially disproportionate benefit exists. 
The determining official must establish that it is more likely than not 
that the decision causes the benefit. Therefore, the proof of a causal 
link cannot be based on mere speculation or inferences drawn from other 
inferences; but must be a conclusion supported by direct and real 
information provided to the determining official. NMFS agrees that 
including some examples of how a determining official may reach or not 
reach the conclusion that a close causal link exists could be helpful 
both to the public, the agency, and the Councils and will advise that 
examples be included in the Regional Recusal Determination Procedure 
Handbook.

Classification

    The NMFS Assistant Administrator has determined that this rule is 
consistent with the provisions of the Magnuson-Stevens Fishery 
Conservation and Management Act, and other applicable law.
    This rule has been determined to be significant for purposes of 
Executive Order 12866.
    This rule modifies 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. Commerce 
certified the rule at the proposed rule stage. At the final rule stage 
the ownership interest has been adjusted. This rule regulates only 
those Council members who have voting privileges and are appointed to 
their position by the Secretary of Commerce. As such, this rule would 
have no effect on any small entities, as defined under the Regulatory 
Flexibility Act, 5 U.S.C. 601. As a result, a final 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: September 4, 2020.
Samuel D. Rauch III,
Deputy Assistant Administrator for Regulatory Programs, National Marine 
Fisheries Service.

    For reasons set out in the preamble, NMFS amends 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.


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2. In Sec.  600.235;
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a. Revise the section heading;
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b. In paragraph (a), add in alphabetical order the definitions for 
``Close causal link,'' ``Expected and substantially disproportionate 
benefit,'' and ``Significant financial interest;''
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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);
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d. Revise paragraph (c)(3), redesignate paragraph (c)(4) as (c)(7), and 
add new paragraphs (c)(4), (c)(5), and (c)(6);
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e. Revise (f) introductory text, (f)(1), and add paragraph (f)(6);
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f. Revise paragraphs (g)(2) and (h) 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.
* * * * *

[[Page 56183]]

    (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:
    (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) A close causal link for Council decisions that either require 
or do not require implementing regulations is determined as follows:
    (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) 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) When calculating significant financial interest, the designated 
official will rely on certain information.
    (i) The information to be used is as follows:
    (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) 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) For attributions concerning 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 100 percent of that company. If an affected 
individual owns less than 100 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) For attributions concerning 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) For attributions concerning 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) For attributions concerning employment or service with 
associations or 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

[[Page 56184]]

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) For the financial interests of a spouse, partner or minor 
child, the designated official will consider the following factors for 
ownership and employment.
    (1) For the financial interests of a spouse, partner or minor child 
related to 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 100 percent of that company. If an 
affected individual's spouse, partner or minor child owns less than 100 
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) For the financial interests of a spouse, partner or minor child 
related to 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 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)-(6) of 
this section, 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 Handbooks shall be 
developed for reach NMFS Region.
    (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. 2020-20019 Filed 9-10-20; 8:45 am]
BILLING CODE 3510-22-P