SPEAKERS CONTENTS INSERTS
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49–404 CC
1998
OVERSIGHT HEARING ON UNITED STATES OWNERSHIP OF FISHING VESSELS
OVERSIGHT HEARING
before the
SUBCOMMITTEE ON FISHERIES CONSERVATION, WILDLIFE AND OCEANS
of the
COMMITTEE ON RESOURCES
HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTH CONGRESS
SECOND SESSION
JUNE 4, 1998, WASHINGTON, DC
Serial No. 105–98
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Printed for the use of the Committee on Resources
Available via the World Wide Web: http://www.access.gpo.gov/congress/house
or
Committee address: http://www.house.gov/resources
COMMITTEE ON RESOURCES
DON YOUNG, Alaska, Chairman
W.J. (BILLY) TAUZIN, Louisiana
JAMES V. HANSEN, Utah
JIM SAXTON, New Jersey
ELTON GALLEGLY, California
JOHN J. DUNCAN, Jr., Tennessee
JOEL HEFLEY, Colorado
JOHN T. DOOLITTLE, California
WAYNE T. GILCHREST, Maryland
KEN CALVERT, California
RICHARD W. POMBO, California
BARBARA CUBIN, Wyoming
HELEN CHENOWETH, Idaho
LINDA SMITH, Washington
GEORGE P. RADANOVICH, California
WALTER B. JONES, Jr., North Carolina
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WILLIAM M. (MAC) THORNBERRY, Texas
JOHN SHADEGG, Arizona
JOHN E. ENSIGN, Nevada
ROBERT F. SMITH, Oregon
CHRIS CANNON, Utah
KEVIN BRADY, Texas
JOHN PETERSON, Pennsylvania
RICK HILL, Montana
BOB SCHAFFER, Colorado
JIM GIBBONS, Nevada
MICHAEL D. CRAPO, Idaho
GEORGE MILLER, California
EDWARD J. MARKEY, Massachusetts
NICK J. RAHALL II, West Virginia
BRUCE F. VENTO, Minnesota
DALE E. KILDEE, Michigan
PETER A. DeFAZIO, Oregon
ENI F.H. FALEOMAVAEGA, American Samoa
NEIL ABERCROMBIE, Hawaii
SOLOMON P. ORTIZ, Texas
OWEN B. PICKETT, Virginia
FRANK PALLONE, Jr., New Jersey
CALVIN M. DOOLEY, California
CARLOS A. ROMERO-BARCELÓ, Puerto Rico
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MAURICE D. HINCHEY, New York
ROBERT A. UNDERWOOD, Guam
SAM FARR, California
PATRICK J. KENNEDY, Rhode Island
ADAM SMITH, Washington
WILLIAM D. DELAHUNT, Massachusetts
CHRIS JOHN, Louisiana
DONNA CHRISTIAN-GREEN, Virgin Islands
RON KIND, Wisconsin
LLOYD DOGGETT, Texas
LLOYD A. JONES, Chief of Staff
ELIZABETH MEGGINSON, Chief Counsel
CHRISTINE KENNEDY, Chief Clerk/Administrator
JOHN LAWRENCE, Democratic Staff Director
Subcommittee on Fisheries Conservation, Wildlife and Oceans
JIM SAXTON, New Jersey, Chairman
W.J. (BILLY) TAUZIN, Louisiana
WAYNE T. GILCHREST, Maryland
WALTER B. JONES, Jr., North Carolina
JOHN PETERSON, Pennsylvania
MICHAEL D. CRAPO, Idaho
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FRANK PALLONE, Jr., New Jersey
NEIL ABERCROMBIE, Hawaii
SOLOMON P. ORTIZ, Texas
SAM FARR, California
PATRICK J. KENNEDY, Rhode Island
HARRY BURROUGHS, Staff Director
DAVE WHALEY, Legislative Staff
JEAN FLEMMA, Democratic Legislative Staff
C O N T E N T S
Hearing held June 4, 1998
Statement of Members:
Pallone, Jr., Hon. Frank, a Representative in Congress from the State of New Jersey
Prepared statement of
Saxton, Hon. Jim, a Representative in Congress from the State of New Jersey
Prepared statement of
Young, Hon. Don, a Representative in Congress from the State of Alaska
Prepared statement of
Statement of Witnesses:
Asicksik, Eugene, President, Norton Sound Economic Development Corporation
Prepared statement of
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Bohannon, Frank, Vice-President, United Catcher Boats
Prepared statement of
Evans, David, Deputy Director, National Marine Fisheries Service, Department of Commerce
Prepared statement of
Gilmore, Jim, Director of Public Affairs, At-Sea Processors Association
Prepared statement of
Kirk, Michael, Cooper, Carvin and Rosenthal
Prepared statement of
Leape, Gerald, Greenpeace
Prepared statement of
North, Rear Admiral Robert C., U.S. Coast Guard, Department of Transportation, accompanied by Thomas Willis, United States Coast Guard
Prepared statement of
Plesha, Joe, General Counsel, Trident Seafoods Corporation
Prepared statement of
Stevens, Hon. Ted, a Senator in Congress from the State of Alaska
Prepared statement of
Additional material supplied:
Alaska Ocean Seafood Limited Partnership, prepared statement of
Fraser, Dave, Captain, FV Muir Milach, prepared statement of
Giles, Don, President, Icicle Seafoods, Inc., prepared statement of
The Alaska Crab Coalition, prepared statement of
The Capacity Reduction and Buyback (''CRAB'') Group, prepared statement of
Hendricks, Jeff, General Manager, Alaska Ocean Seafood Limited Partnership, prepared statement of
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TCW Special Credits, Los Angeles, California, prepared statement of
Communications submitted:
Assessment of the World's Fishing Fleet 1991-1997, A Report to Greenpeace International, John Fitzpatrick and Chris Newton
OVERSIGHT HEARING ON UNITED STATES OWNERSHIP OF FISHING VESSELS
THURSDAY, JUNE 4, 1998
House of Representatives, Subcommittee on Fisheries Conservation, Wildlife, and Oceans, Committee on Resources, Washington, DC.
The Subcommittee met, pursuant to other business, at 10:43 a.m., in room 1324, Longworth House Office Building, Hon. Jim Saxton (chairman of the Subcommittee) presiding.
Mr. SAXTON. I ask you now, with consent, that Mr. Pombo and Mrs. Chenoweth be invited to sit on the panel, inasmuch as they are not members of the Subcommittee.
The Subcommittee on Fisheries Conservation, Wildlife, and Oceans will come to order for purposes of a hearing.
STATEMENT OF HON. JIM SAXTON, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW JERSEY
Mr. SAXTON. Today we are discussing the American ownership of fishing vessels under the Magnuson-Stevens Fishery Conservation and Management Act and the Commercial Fishing Industry Vessel Anti-Reflagging Act of 1987.
The Magnuson-Stevens Act has largely achieved the goal of eliminating foreign fishing in the EEZ and in developing domestic fisheries. In addition to this primarily successful legislation, Congress has taken other steps to foster further Americanization of the fleet. One bill to achieve this was the Commercial Fishing Industry Vessel Anti-Reflagging Act of 1987. This legislation created a new ownership standard, required that vessels engaged in the U.S. fishery be built in the United States, and required that specific manning requirements by American crews be maintained.
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Two primary principles of this legislation, the American ownership standard and the American built standard, included grandfather or savings clauses. This was to allow vessel owners who were already in the fishery, or those who had made substantial investments to rebuild vessels in foreign shipyards, to maintain their eligibility to participate in U.S. fisheries.
The Coast Guard, under the jurisdiction of the Department of Transportation, was charged with the implementing of these new requirements for fishing vessels. Differences in the interpretation of the two grandfather clauses by the Coast Guard has led to unfulfilled goals for the legislation. And that is why the Subcommittee is meeting today to analyze this issue.
I am especially interested in the subject of U.S. ownership after this Subcommittee's scrutiny of the ATLANTIC STAR.
Welcome to our many distinguished witnesses, and I look forward to their testimony.
[The prepared statement of Mr. Saxton follows:]
STATEMENT OF HON. JIM SAXTON, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW JERSEY
Good morning. Today we are discussing the American ownership of fishing vessels under the Magnuson-Stevens Fishery Conservation and Management Act and the Commercial Fishing Industry Vessel Anti-Reflagging Act of 1987.
The Magnuson-Stevens Act has achieved the goal of eliminating foreign fishing in the EEZ and developing domestic fisheries. In addition to this largely successful legislation, Congress has taken other steps to foster further Americanization of the fleet. One bill to achieve this was the Commercial Fishing Industry Vessel Anti-Reflagging Act of 1987. This legislation created a new ownership standard, required that vessels engaged in the U.S. fishery be built in the United States, and required that specific manning requirements by American crews be maintained.
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Two primary principles in the legislation, the American ownership standard and the American built standard, included grandfather or ''savings'' clauses. This was to allow vessel owners who were already in the fishery—or those who had made substantial investment to build or rebuild vessels in foreign shipyards—to maintain their eligibility to participate in U.S. fisheries.
The Coast Guard, under the jurisdiction of the Department of Transportation, was charged with implementing these new requirements for fishing vessels. Differences in the interpretation of the two grandfather clauses by the Coast Guard has led to unfulfilled goals of the legislation. And that is why the Subcommittee is meeting to analyze this issue. I am especially interested in the subject of U.S. ownership after this Subcommittee's scrutiny of the ATLANTIC STAR. Welcome to our many distinguished witnesses I look forward to your testimony.
Mr. SAXTON. Before I turn to Mr. Young to introduce our first witness, let me ask Mr. Pallone if he has any opening statement.
STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW JERSEY
Mr. PALLONE. Thank you, Mr. Chairman. I want to thank you for having this oversight hearing today. You mentioned the Commercial Fishing Industry Vessel Anti-Reflagging Act which was signed into law in 1988. And that required that only vessels which are owned by a majority of U.S. interests can be U.S. flagged and eligible to fish in the U.S. Exclusive Economic Zone. And the law also required that fish processing vessels entering the U.S. fishery be U.S. built, and that vessels rebuilt abroad be prohibited from participating in the U.S. Fishing industry. The Coast Guard was given the responsibility for enforcing these requirements. Unfortunately, loopholes in the law have allowed several large vessels to be rebuilt overseas, thereby circumventing the law and going against congressional intent.
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According to a 1990 GAO report, the Anti-Reflagging Act's American control provisions have had little impact on ensuring that U.S. fishery operations are controlled by U.S. citizens. And this is a result of the Coast Guard's interpretation allowing the grandfather exemption to remain with a vessel even if the vessel is subsequently sold to a foreign-owned company. Consequently, should the Congress desire another result, it may wish to consider changes to the existing legislation.
Now I understand that Senator Stevens will testify before us, and he has introduced the American Fisheries Act in the Senate, S. 1221, which would increase the minimum U.S. ownership requirement for U.S. flagged fishing vessels to 75 percent in order to fly the U.S. flag and qualify for fishery endorsements. This bill would also phaseout the use of fishing vessels greater than 165 feet in length and prohibit vessels rebuilt abroad from participating in the U.S. fishing industry.
As I understand it—and the Senator will probably talk more about it—his bill is primarily a fisheries allocation bill for the North Pacific U.S. EEZ. And while the bill would likely have a limited impact on fishing vessels off the Atlantic Coast, it could dramatically change the make-up of fishing vessels on the West Coast and the Bering Sea.
I believe that U.S. flagged vessels should be primarily U.S. owned. The American citizens, not foreign interests, should be the ones to catch fish in our waters. And we should ensure that our important fishery resources are adequately protected for the current and future generations.
I understand that today's hearing is not meant to debate the merits of the Senator's bill, but rather to shed light on what progress has been made, if any, in increasing the American control of fishing vessels in our EEZ.
And again, I just want to thank you for holding this hearing, and I certainly look forward to the statement that Senator Stevens will be making.
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[The prepared statement of Mr. Pallone Jr., follows:]
STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW JERSEY
Mr. Chairman,
Thank you for holding this oversight hearing today on United States Ownership of Fishing Vessels. As you know, our Committee has jurisdiction over responsibly managing our fishery resources under the Magnuson-Stevens Act.
The Commercial Fishing Industry Vessel Anti-Reflagging Act was signed into law in 1988. It required that only vessels which are owned by a majority of U.S. interests can be U.S. flagged and eligible to fish in the U.S. Exclusive Economic Zone. The law also required that fish processing vessels entering the U.S. fishery be U.S. built and that vessels rebuilt abroad be prohibited from participating in the U.S. fishing industry. The Coast Guard was given the responsibility for enforcing these requirements. Unfortunately, loopholes in the law have allowed several large vessels to be rebuilt overseas, thereby circumventing the law and going against Congressional intent.
According to a 1990 General Accounting Office report, ''The Anti-Reflagging Act's American control provisions have had little impact on ensuring that U.S. fishery operations are controlled by U.S. citizens. This is a result of the Coast Guard's interpretation allowing the grandfather exemption to remain with a vessel even if the vessel is subsequently sold to a foreign-owned company. Consequently, should the Congress desire another result, it may wish to consider changes to the existing legislation.''
Senator Stevens who will testify before us shortly, has introduced the American Fisheries Act in the Senate. S. 1221 would increase the minimum U.S. ownership requirement for U.S. flagged fishing vessels to 75 percent in order to fly the U.S. flag and qualify for fishery endorsements. The bill would also phase out the use of fishing vessels greater than 165 feet in length and prohibit vessels rebuilt abroad from participating in the U.S. fishing industry.
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As I understand it, S. 1221 is primarily a fisheries allocation bill for the North Pacific U.S. EEZ. And while the bill would likely have a limited impact on fishing vessels off the Atlantic Coast, it could dramatically change the make up of fishing vessels on the West Coast and Bering Sea. I believe that U.S. flagged vessels should be primarily U.S. owned. American citizens, not foreign interests, should be the ones to catch fish in our waters. We must also ensure that our important fishery resources are adequately protected for the current and future generations.
Today's hearing is not meant to debate the merits of the Stevens Bill, but rather to shed light on what progress has been made, if any, in increasing the American control of fishing vessels in our EEZ.
Thank you again, Mr. Chairman, for holding this hearing. I look forward to hearing from Senator Stevens, the Coast Guard, National Marine Fisheries Service, and others today on this matter.
Mr. SAXTON. Thank you, Mr. Pallone.
I ask unanimous consent that all Subcommittee members be permitted to include their opening statements in the record; without objection. And for purposes of introduction of our colleague from the Senate and an opening statement——
Mr. MILLER. I just want to ask——
Mr. SAXTON. The gentleman from California.
Mr. MILLER. I just want to join with Mr. Pallone and others to say that I believe that this hearing raises very, very serious issues about the goal of the Americanization of this resource and other issues about the capitalization of the fishing resources here.
And I want to thank you for holding this hearing. It's an important hearing.
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STATEMENT OF HON. DON YOUNG, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ALASKA
Chairman YOUNG. Mr. Chairman, I appreciate you holding these hearings, and I will go through my opening statements as quickly as possible.
Mr. SAXTON. May I just interrupt you——
Chairman YOUNG. Yes.
Mr. SAXTON. [continuing] long enough to ask unanimous consent that Mr. Smith be permitted to sit on the panel as much as he's not a member?
Chairman YOUNG. That's fine.
Mr. SAXTON. Thank you.
Chairman YOUNG. Now, may I continue?
Mr. SAXTON. Please.
Chairman YOUNG. Thank you.
[Laughter.]
I appreciate it.
Before I introduce our esteemed witness and the author of S. 1221—which we're not holding the hearing on today—I just thank you, Mr. Chairman, for holding this hearing. It's deeply important to me, and I believe the fisheries, itself.
There are many who may not know the Magnuson-Stevens Act originated in this Committee. Of course, now it's named the Magnuson-Stevens Act, and it was enacted in 1976. This Act gives Americans control of the fisheries. That was the first step; it was the right step.
And then we passed the Commercial Fishing Industry Vessel Anti-Reflagging Act in 1987 to make sure that American owned and controlled vessels harvested our fishery resources. I specifically supported this bill because I believed it was important to have U.S. owned and U.S. manned vessels harvesting U.S. resources.
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While we thought both laws were successful in Americanizing the fisheries, it appears we weren't as successful as we thought. In trying to be fair to those vessel owners who had already made substantial investment in fishing vessels—either those vessels already in the fisheries or those being rebuilt in foreign shipyards—Congress created grandfather clauses which the Coast Guard has now misinterpreted and which have potentially allowed the opposite results to occur.
It now appears the Coast Guard has ruled that any vessel which was already in the fishery at the time of the passage of the Act could be sold to foreign interests. I'm deeply disappointed in the Coast Guard, although I have always been a strong supporter of it. Someone needs some better legal advice. And according to the GAO report in 1990, that Coast Guard ruling could lead to 29,000 fishing vessels that were in the fisheries at the time of the Anti-Reflagging Act's passage to be sold to foreign interests. This is clearly not what we intended.
I was the sponsor of the ownership amendment at the Merchant Marine and Fisheries Committee markup. Existing law at the time allowed foreign entities to set up American corporations, even if they were foreign controlled, and own fishing vessels harvesting fish in U.S. waters. The intent of my amendment was to require a majority of voting stock to be in the hands of individuals who are American citizens. The Coast Guard ruling has created an opposite effect.
In addition, the interpretation of the grandfather clause which allowed a certain number of vessels to be rebuilt in foreign shipyards and retain their eligibility to fish in U.S. waters may have had unintended consequences. There have been allegations that a number of speculative contracts were written to allow vessels to be rebuilt and brought to the U.S. fisheries when there had been no intent to do so prior to the grandfather clause, and the Coast Guard's interpretation of that clause.
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I am also concerned that the Coast Guard did not seem to think that changes in the specifications of the vessels being rebuilt mattered. In several documented cases, vessels went to shipyards with the intent of being converted to fish tender vessels which do not harvest fish. And when they came out of that shipyard, low and behold, they were large factory trawlers certain to harvest fish.
I also believe the Coast Guard missed the boat on interpreting the ownership requirement by allowing vessels which entered foreign shipyards as U.S.-owned projects to leave the shipyard and enter U.S. fisheries as totally foreign-owned projects.
Most of the vessels which entered the U.S. fisheries through these grandfather clauses are now involved in the Bering Sea groundfish fishery. There is an overcapitalization problem in this fishery. I don't think anyone, including the witnesses, will debate that issue. I have tried not to assess blame nor have I claimed that eliminating all factory trawlers is the solution to that problem. There is an overcapitalization problem.
Having said that, it is important that bycatch be further reduced in this fishery. Now I've talked to all sides in this issue, urged them to set down, stop the free-for-all, and stop the bycatch. So far, I've not had a proposal other than from the CDQ community. And by the way, I want to remind the people, the CDQ program was adamantly opposed by certain people in this audience when we tried to pass it. And now they're hiding behind the program. Very frankly, I might want to look at the CDQ program, and maybe we ought to CDQ the whole fishery. Let's really get working together where we don't have a free-for-all, and where we do maintain the shots, and we protect this fishery.
This is not about allocation; this is about protecting the Bering Sea. I'm deeply disturbed that some people would think that the current situation is perfectly alright. That we don't have to worry about the sea; we can continue to catch these fish. We can continue to do harm to other species other than what they're targeted. I think this is terribly incorrect.
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Again, most of you in this room have talked to me some time or other, and I've suggested you sit down and talk this over. You have not done so. Now I'm going to tell you right now, this issue is not going away. This issue is going to be with us. We're not talking about S. 1221, but we're talking about legislation that will be supported universally.
This trawl fleet has to understand they're small in numbers; they're not large in numbers. Yes, they have a few dollars, and they have a lot of ships. But, in fact, the American public wants this industry to clean its act up.
I'm hoping that the witnesses today will take and address the issues I've just suggested—and even those issues in S. 1221, although we're not debating that bill today.
And the last issue, may I say one thing? For those honored guests in this Committee today, this is not a property taking. Fishing has always been at the privilege of a State or the Federal Government. It has never been a right in any coastal area in the United States. It has always been a prerogative of the State or the prerogative of the Federal Government, and it is not a taking. And to have someone that has been a hired gun write a legal opinion deeply disturbs me. A hired gun, not one that doesn't have an interest, but somebody that's been employed, has been hired, and now writes an opinion saying it's a taking. I also have another little group of people called the National Public Policy Research. And I don't know who in the world they are. God help us; there are so many of these people around that say, ''the bill in Congress, S. 1221, the American Fisheries Act managed to, all by itself, to violate the first three of the four abuses above.'' And I won't read those. ''The bill sponsored by Alaska's Ted Stevens would throw 1,500 Americans in Washington State out of work.'' Are we worried about jobs, or are we worried about the species? Are we worried about jobs, or are we worried about a continued ability not only to harvest but do it correctly?
That's the role of this Committee. If we continue to do what's been done, we'll destroy the fisheries. The jobs will be lost, and we'll lose a great part of our history if we don't do something.
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And, Mr. Chairman, I want to compliment you again for having this hearing today. And I'm a little bit excited now, but if you think I'm excited, watch my Senator.
[Laughter.]
[The prepared statement of Mr. Young follows:]
STATEMENT OF HON. DON YOUNG, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ALASKA
Mr. Chairman, I appreciate you holding this hearing today on the American ownership of fishing vessels. This is an issue that has been debated and addressed by Congress since the 1970's.
The Magnuson-Stevens Fishery Conservation and Management Act, enacted in 1976, gave first preference to American-flag vessels for the harvesting of fishery resources in U.S. waters. This was the first step in replacing foreign fleets in U.S. waters with our own fishing vessels.
We then passed the Commercial Fishing Industry Vessel Anti-Reflagging Act of 1987 to make sure that American owned and controlled vessels harvested our fishery resources. I specifically supported this bill because I believed it was important to have U.S. owned and U.S. manned vessels harvesting U.S. resources.
While we thought both laws were successful in Americanizing the fisheries, it appears we weren't as successful as we thought. In trying to be fair to those vessel owners who had already made substantial investment in fishing vessels—either already in the fisheries or being rebuilt in foreign shipyards—Congress created grandfather clauses which the Coast Guard has now mis-interpreted which has potentially allowed the opposite results to occur.
It now appears that the Coast Guard has ruled that any vessel which was already in the fishery can be sold to foreign interests. According to a GAO report in 1990, that could lead to 29,000 fishing vessels that were in the fishery at the time of the Anti-Reflagging Act's passage to be sold to foreign interests. That is clearly not what Congress intended. I was the sponsor of the ownership amendment at the Merchant Marine & Fisheries Committee markup. Existing law at the time allowed foreign entities to set up American corporations, even if they were foreign controlled, and own fishing vessels harvesting fish in U.S. waters. The intent of my amendment was to require a majority of voting stock to be in the hands of individuals who are American citizens. The Coast Guard ruling has created the opposite effect.
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In addition, the grandfather clause which allowed a certain number of vessels to be rebuilt in foreign shipyards and retain their eligibility to fish in U.S. waters may have had unintended consequences. There have been allegations that a number of speculative contracts were written to allow vessels to be rebuilt and brought into U.S. fisheries when there had been no intent to do so prior to the grandfather clause and the Coast Guard's interpretation of that clause.
I am also concerned that the Coast Guard did not seem to think that changes in the specifications of the vessels being rebuilt did not matter. In several cases, I understand vessels went into shipyards with the intent of being converted to fish tender vessels which do not harvest fish. When they came out of the shipyard they were large factory trawlers which certainly do harvest fish.
I also believe the Coast Guard missed the boat on interpreting the ownership requirements, by allowing vessels which entered foreign shipyards as U.S.-owned projects to leave the shipyard and enter U.S. fisheries as totally foreign-owned projects.
Most of the vessels which entered the U.S. fisheries through these grandfather clauses are now involved in the Bering Sea groundfish fishery. There is an overcapitalization problem in this fishery. I don't think anyone here will debate that issue. I have tried not to assess blame nor have I claimed that eliminating factory trawlers is the solution to that problem.
Having said that, it is important that bycatch be further reduced in this fishery. I am not happy that in some years this fishery is closed not because the target species quota is met, but rather because the bycatch quota is reached. The amount of salmon, crab and halibut that are wasted in this fishery is criminal. I understand the CDQ vessels are required to meet more stringent conservation requirements when they fish in this fishery. That is something else we need to look into.
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I suspect we will hear more about these issues from the witnesses and I expect the Coast Guard will detail why they followed the interpretations that allowed these things to happen.
A number of people have attempted to turn this hearing into a debate on S. 1221, introduced by Senator Stevens. This is not a hearing on that legislation and, at this point, no legislation has been introduced on the House side. It is clear that the Stevens bill does raise some interesting questions about why the goals of Americanizing the fisheries were not realized, but this hearing is not on that bill.
In addition, some people have questioned whether fishing permits and licenses are considered property and have tried to turn this into a debate on property rights. Let me very clearly state that fishing permits and licenses do not give the permit holder any right to fishery resources in U.S. waters. Permits are a privilege that allow the permit holder to attempt to harvest fish. There are no guarantees beyond that. No one here should question my leadership in the area of defending personal property rights but in this case there is no claim of property associated with fishing permits or licenses.
I look forward to hearing today's witnesses and engaging in a frank discussion of why the goals of Americanizing the U.S. fisheries has not been fully realized.
Thank you, Mr. Chairman.
Chairman YOUNG. At this time, I'd like to introduce my dear and good friend that has been with me for many, many years, that knows this issue probably better than anybody in this room—including myself—and that works very hard to try to make sure, not only Alaska, but all of the seas are protected. This is our Senior Senator. To look at him, I'm beginning to wonder if he's not taking something—well, there's new drugs out on the market nowadays——
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[Laughter.]
[continuing] but I tell you——
[Laughter.]
He is the person that has introduced the legislation. He'd like to talk about this issue. It's my honor to introduce our Senior Senator, Senator Ted Stevens.
Senator, welcome.
Mr. SAXTON. Senator, thank you for being here. Why don't you proceed as you see fit. And we've allocated enough time for you to make your case thoroughly. So why don't you proceed?
STATEMENT OF HON. TED STEVENS, A U.S. SENATOR IN CONGRESS FROM THE STATE OF ALASKA
Senator STEVENS. Mr. Chairman, thank you very much. And, Congressman Young, Mr. Chairman, I appreciate your comment. You know as I look around this room I've been sort of——
Chairman YOUNG. Senator, pull that mike just a little closer to you.
Senator STEVENS. I've been reminiscing a little bit because 40 years ago, as legislative counsel to the Interior Department, I came up here and spent many hours, many days, in this room as we fought for statehood. And to now appear once again before you and know that our Congressman is the chairman of this Full Committee, it's just something that is hard to believe. Those days of 40 years ago are too bright in my mind really. I'm liable to start reminiscing about them, but I hope I won't.
And I do thank you all for your statements. Mr. Pallone, I'd like to hear your comments. And Mr. Miller, George, I hope you will go into this very deeply because it's a very serious issue. It's of great importance, I think, to the United States fisheries as a whole. And it's obvious, from what Congressman Young has said, it's extremely important to the fisheries off our shore. And I hope by the time you conclude these hearings, Mr. Chairman, you will be convinced—as I was—that legislation in this area is very much needed.
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I brought a series of charts that my staff has prepared to illustrate why Congress passed the Anti-Reflagging Act. And I've got to tell you, ladies and gentlemen, I've just returned from a flight to California and back in less than 24 hours because of a serious illness of one of my children—which was a very successful operation, thank God. But if I'm a little slow this morning and not as hot as Congressman Young would like to have me be, it's because I'm slightly restrained by a little lack of sleep.
From 1984 to 1987, the foreign-flag fishing was phased out under the Magnuson Act. In 1986, we realized that nothing in our Federal law prevented foreign-flag vessels from simply reflagging to become U.S. flags. So, we introduced and proceeded with the Commercial Fishing Industry Vessel Anti-Reflagging Act of 1987. Its goals were to require the U.S. control of fishing vessels that fly the U.S. flag, and to stop foreign construction of U.S. flag vessels under the existing interpretation of the term ''rebuild,'' and to require U.S. flag fishing vessels to carry U.S. crews.
Of these goals, only the U.S. crew requirement was achieved. We did not stop foreign interests from owning and controlling U.S. vessels. In fact, as Congressman Young has stated, over 29,000 of the 33,000 U.S. flag fishing vessels in existence are not subject to any controlling interest requirement. Let me say it again: 29,000 of the 33,000 are not required to be controlled by the United States even though they fly—by United States citizens—even though they fly the U.S. flag.
We also failed to stop the massive Norwegian ship-building program, which took place between 1987 and 1990, that allowed 20 of the world's largest fishing vessels ever built to come into our fisheries and fish in our exclusive zone as American ships. Today, half of the Nation's largest fishery, which is the Bering Sea pollock, continues to be harvested by foreign interests on foreign-build vessels that are not subject to the U.S.-controlling interest standard.
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Now if you look at this chart, if you look at the later years, you'll see that those are the white bars—they're labeled domestic. If we had it shaded for those that are really foreign controlled, it would be more than half. So, while the Magnuson Act has worked and we have Americanized the fisheries, we have not Americanized the vessels.
So, on September 25, I introduced the American Fisheries Act that some of you have mentioned, S. 1221. Senators from just about every region of the country joined in support of this measure. The co-sponsors now include Senator Breaux from the Gulf, Senator Hollings from the Southeast, Senator Gregg from Northeast, Senator Wyden from the West Coast, and my colleague, Senator Mikulski. This bill would eliminate the foreign ownership loophole that the Coast Guard interpreted into the Anti-Reflagging Act. Congress provided a grandfather clause in that Act to allow vessels whose owners did not meet the new 51 percent standard, to continue to fish until that vessel is sold. Once the vessel is sold, it was intended to have to comply with the controlling interest standard.
The Coast Guard misinterpreted that grandfather clause to run with the vessel—the legal concept of running with the vessel, to go with the vessel as the vessel is sold. And the matter was taken to court, and the DC Court of Appeals upheld the Coast Guard reading, but all sides agreed that the practical result was absurd giving the congressional primary intent of eliminating foreign control over our EEZ fishing.
The next chart I have is chart 2, indicates why I believe the Coast Guard took the position it did. In the 3 months after the Anti-Reflagging Act became law, the Coast Guard Vessel Documentation Office began issuing letter rulings that granted permanent U.S. ownership waivers. The letter rulings were signed by the Chief of the Vessel Documentation Office, who—according to the Coast Guard at the time—was not required to get any other clearance to issue such letters. About three-quarters of the rulings were issued in response to requests from two attorneys, one who was a former employee of the Documentation Office. As the chart shows, by the time a Coast Guard legal opinion was prepared in December 1988, the Documentation Chief had granted at least nine permanent waivers. This December 1998 legal analysis, prepared by the Chief of the Coast Guard Maritime and International Law Division, correctly concluded that the grandfather provision could only be interpreted to apply to the current owner of a vessel. Nevertheless, the Documentation Office continued to issue letter rulings granting permanent exemptions.
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Almost 2 years later, on November 16, 1990, the Chief of the Coast Guard Operational Law Enforcement Division wrote a memorandum asking why the earlier legal opinion was not being followed. By that time, the Documentation Office had issued at least 13 permanent waivers. For reasons still not clear, the Coast Guard ultimately ignored the Maritime and International Law Division memo, the previous legal opinions I have mentioned, and in its final rule 2 years after the letter rulings, the Coast Guard read the grandfather provision once again to run with the vessel. We have since learned that the Coast Guard did not provide the Maritime and International Law Division opinion to either the district or appeal courts during the lawsuits.
At our Senate hearing in March, I called on the General Accounting Office to investigate these Coast Guard actions. The GAO will deliver its report to our committee—the Congress committee and to you—in mid-July, and I expect it will be helpful in ensuring that similar mistakes are not made again by the Coast Guard. For instance, the Coast Guard informed us that the letter rulings were permitted by the Administrative Procedures Act. And I suggest that that might be a subject, Mr. Chairman, you should look into, as we do, as to whether or not that should be changed. For one official to be able to issue a decision which binds the United States forever to recognize a grandfather and running with the ship until it expires, contrary to the intent of Congress, because of a provision that's been misinterpreted in the Administrative Procedures Act, to me, means that Act should be clarified.
S. 1221 does not seek to make those changes, and we will look into that later. This bill seeks to correct the negative effects caused by the Coast Guard's actions which I have mentioned. S. 1221 would eliminate all exemptions to the U.S.-controlling interest requirement and would raise the standard from 51 percent up to 75 percent. Now that happens to be the same standard that applies to all other vessels operating commercially in U.S. waters. There must be at least 75 percent ownership to operate a U.S. flag vessel in U.S. waters.
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And unlike the Jones Act, the system under our fisheries law is really a preference system for U.S. fishing industry interests, not an outright prohibition on foreign boats. The Magnuson Act—and I also note that it's the Law of the Sea concept, too—require that foreign flag vessels be allowed to harvest the portion of any U.S. catch that U.S. flag vessels cannot harvest. It would be possible, in other words, to bring in a foreign flag vessel to harvest a portion of our EEZ allocations if the U.S. flags could not harvest that portion. That is not the situation, however, in this area that we're talking about because these are foreign vessels that have been flagged as U.S. in order to pose as part of the Americanization effort. Without a meaningful controlling interest standard, there is no way to give U.S. interests the fishing preference envisioned under our law. Our law provides a preference for U.S. vessels, and so does the Law of the Sea. It provides that each nation can give a preference to its vessel.
Under our bill, S. 1221, vessel owners would have 18 months to comply with the new controlling interest standard and could be sold or otherwise transferred to meet those requirements. The Maritime Administration, instead of the Coast Guard, would review company documents for compliance. MarAd has already expertise in this kind of work through the Federal loan and subsidy programs for ocean carriers that it administers. And to my knowledge, we've not had any conflict over their rulings.
Fishing vessels under 100 tons, which tend to be owner-operated, would continue to demonstrate compliance as they do. Now there is a simple form that they file. The fishing vessels over 100 tons, of which there are about 3,500, would be reviewed annually, as well as whenever a new owner acquires more than 5 percent ownership of the vessel.
Gentlemen and ladies, even if we enact that bill, S. 1221, in the Congress today, it would be a quarter of a century before we would achieve Americanization as envisioned by the 1976 Magnuson Act. And again, in my judgment, everything in S. 1221 is in compliance with the Law of the Sea concepts.
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Now let me turn to foreign rebuilds. A second, major component of S. 1221 would correct the Coast Guard's misinterpretation of the foreign rebuild grandfather provision. Prior to the Anti-Reflagging Act, Federal law allowed U.S. flag vessels to be rebuilt in foreign shipyards. Under the Coast Guard's interpretation of that rebuild law, a vessel could be essentially built in a foreign shipyard as long as any portion of that vessel came from a U.S. hull. Now to illustrate how extreme the rebuild could be, I want you to look at this next board that's there by my young assistant. It's chart 3; it shows the vessel ACONA, which was a 74-foot, 167-ton vessel fishing in U.S. waters, before being rebuilt in Norway. There it is, that little vessel right in the center tied up—I don't know which dock it is; looks like it's tied up in Cordova. It could be Kodiak.
Now take a look at this next one; this is chart 4, the ACONA after being rebuilt. A 74-foot, 167-ton vessel is now 252 feet, weighs over 5,000 tons, and is now the ACONA. The only thing left of the—and it's now called the AMERICAN TRIUMPH, it was the ACONA. The only thing left of the ACONA is a piece of steel in the side. I'm told there may be two pieces of steels, one in each side. Now that's a rebuild. It really is a totally new Norwegian vessel brought in and now poses as an American vessel. And it is flagged as an American vessel. This is one of about 20 of the so-called rebuilt vessels that now fish in the Bering Sea off our State.
The Anti-Reflagging Act amended Title 46 to prohibit U.S. flag vessels from being rebuilt overseas. Unfortunately, it included this grandfather clause we've mentioned for six vessels which we knew of at the time for which legitimate investments had been made to rebuild those vessels. The grandfather provision allowed a vessel to be rebuilt in a foreign yard and still qualify for the U.S. flag if the U.S. hull was purchased by July 28, 1987; a contract for rebuilding was signed within 6 months after the enactment of the Anti-Reflagging Act; and the vessel was redelivered to the owner by July 28, 1990.
Now, Congress specifically required the rebuilt vessel to be delivered to the owner of the U.S. hull in order to discourage speculators from buying U.S. hulls during the time we were working on this bill. Unfortunately, the Coast Guard did not require the same owner to receive the rebuilt vessel. And the speculation we sought to prevent became quite great. So, we're not talking really about American fishermen. We're not talking about people who have jobs on American boats. We're talking about stealth foreign vessels in our waters flying the U.S. flag.
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Now, the next chart, No. 5, shows the speculative contracts for U.S. hulls that were signed between the original House markup which was scheduled for June 9, 1987, and the rescheduled markup which was held on July 28, 1987, which became the cutoff dates for contracts on U.S. hulls that could be rebuilt. Contracts for at least 13 vessels were signed in those 6 weeks, including 4 on the day before the markup.
As you can see on the chart, like the ACONA, these vessels were rebuilt into massive fishing vessels. And the chart shows the extent to which that rebuilding took place. It's just staggering, the changes. A rebuilt vessel, when they first started going overseas—they went overseas primarily because they were putting in new types of accommodations for the fishermen. And they're what we call the hotel rebuilds. They were sent over to have these new rooms added that they redesigned, and they came back, and they're essentially the same hull. If you look at this, you will find what happened to these vessels as they went from 500 tons or less than 500 tons to almost 5,000 tons. I think this is one of the scandals of the fishing industry, what happened during this period.
S. 1221—and incidently, I'm not going to rest until I get to the bottom of that scandal. I believe there was real fraud. I believe there were improper actions taken. And I intend to see that suits are brought and we, under the Freedom of Information, get the information that will show the conspiracy that existed at that time by a group of speculators to take advantage of this delay in the markup, over here in the House side, to just throw paper around and claim that those papers represented vessels that were to be rebuilt.
S. 1221 would correct the problems created by this unintended influx of capacity by requiring some of those vessels to leave. As Congressman Young has said, there is no question—I don't think anyone before you will assert that there is not tremendous overcapacity in the fleet that harvests the area that is still the most productive of all of our fishery areas. Half of the fish that Americans consume is caught off of the State of Alaska. Now, this is not a bill to deal with allocations between U.S. and foreign vessels. It's not a bill to try to deal with any legitimate ownership. It's to try to deal with the situation that came about because of the actions taken by that Documentation Office that continued to approve pieces of paper that have now been ruled to go with the vessels that were constructed as enormous new vessels overseas, and allow them into our waters as rebuilt vessels.
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We do not eliminate all of the foreign factory trawlers, or even all of the foreign factory trawlers that came in through that rebuild loophole. S. 1221 would remove from the fisheries only half of the rebuild vessels that continued to be foreign-controlled on September 25, 1997. I might add, many of them have gone through new devices to try to show they're not foreign-controlled since that date.
From the records we have, it appears that 18 vessels were speculative, where the original owner of the hull did not receive delivery of the rebuild vessel. That's my definition of speculative, where someone stepped in and bought the paper that represented a vessel that was over there like the ACONA and rebuilt it into an enormous factory trawler. It had nothing to do with trawling before that time. It became a factory trawler after the rebuild clause was fused. Of those 18, only 13 appear to be foreign-owned on September 25, 1998. Of the 13 foreign-owned boats, 3 have already left. They went over and reflagged in Russia, and continue to fish there so far as I know. Under S. 1221, the remaining vessels, which we believe to be 10, would have to find a vessel of equal or greater size to surrender its U.S. flag in order to continue flying the U.S. flag. And there are vessels out there that are on the beach; they could be bought if they wish to stay on that basis.
This was a more lenient approach than requiring all of the speculative vessels to leave U.S. fisheries. It would make the current owners of the vessels that caused the overcapitalization problems responsible for fixing the problem, but with the potential for some time to remain in the fishery.
Let me parenthetically tell you one of the things we're working on in the Senate is a new concept of trying to find some way to have a buyout of some of those vessels in the North Pacific. Several of the fisheries have come to us and said they want to have an opportunity to do what has been done in New England and to buy down some of those vessels. And the owners of the vessels would borrow the money from a fund and repay that fund so that it would not be taxpayers' money that would be used. But they're devising ways to try and bring about a voluntary reduction in the capacity in each of these fisheries. But this main fishery, the pollock fishery, the investments are so large and the numbers are so large of the foreign-owned vessels, that that's just not possible to approach this problem on that basis.
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The foreign rebuild provisions of S. 1221 would likely result in only five factory trawlers leaving the Bering Sea fisheries. It will allow 50 to 55 factory trawlers to remain, provided they comply with the U.S.-controlling interest standard—which any lawyer will tell you, it's not that difficult. We thought—those of us who designed this bill in the Senate side thought, under the circumstances, that this bill is very fair. I think we bent over backward to be fair. But since September, I have seen clearly that the people who have brought these vessels in knew what they were doing; they knew they were invading Congressional intent. And they have conducted just a staggering campaign now to try and defeat S. 1221.
And my last chart I have there is chart 6. It shows the foreign rebuild grandfather was implemented by the Coast Guard in much the same way as the ownership grandfather clause. There are two separate grandfather clauses in the Anti-Reflagging Act. At least 13 rebuild waivers were granted before the final rule was promulgated, essentially foreclosing the possibility of correctly interpreting the provision. As with the ownership grandfathers, the letter rulings were issued primarily by the chief of the Vessel Documentation Office, and the majority were issued to two attorneys, again, one of whom was a former employee of the person that issued those letters. When you finish your review today, I hope you will consider whether we should remove all of the speculative vessels that came through the loophole and continue to be foreign-owned.
If we continue to be opposed on a basis of our FARE bill, we're going to have a knock-down, drag-out fight in the Congress to win this issue to protect these fisheries in the North Pacific. We might as well go ''whole hog'' and get out of the whole area those who have speculated and tried to now destroy our fisheries based upon that speculation.
I know I'm taking a long time, but there are some interesting views on the final major component of the bill. We called it the large vessel phaseout. It provides that no new fishing vessels greater than 165 feet, 750 tons, or 3,000 shaft horsepower would be allowed into these fisheries. Fishing vessels above any of these three thresholds that are already in the fisheries on September 25, 1997, could stay in for the useful life of the vessel, provided they meet the controlling interest standard and don't surrender their fishery's endorsement.
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This phaseout could easily be called a moratorium. The measure would not only prevent new boats from entering, it would prevent foreign flag vessels from coming back into the U.S. fleet. I mention that of great importance because many of these large vessels went over to Russia and started fishing there as Russian vessels. And now they want to come back and claim they're still U.S. vessels.
After the Senate hearing, I told many of the people involved I'd be willing to consider allowing the Councils, the Regional Fisheries Councils, to provide a means to override the moratorium even though I've yet to hear a single U.S. fishery that needs or wants any more large fishing vessels. It does seem to me Council created the regional corporations; the regional corporations should be the ones to decide if there is any need for any new vessels that would exceed that standard set by S. 1221.
The bill also includes a special measure for Atlantic herring and mackerel fisheries, in part because a factory trawler recently modified overseas obtained a fishery endorsement before the control date of S. 1221. I believe that's sought by the people in the area very strongly.
I would make one suggestion in closing, Mr. Chairman, and that is on what Congressman Young discussed—the concept of taking. I have practiced law now for almost 50 years, Mr. Chairman, and I would not draft a bill that would violate the Constitution knowingly. It was not a taking when we phased out the foreign flag vessels in the early–1980's. They were all foreign flag vessels then, and we've set up a provision for Americanization through the joint venture phase. And even the joint ventures were phased out by an act of Congress. And it will not be a taking when we remove the foreign-controlled vessels that purported to be U.S. flags from the U.S. flag registration. In both cases, we are eliminating a privilege the United States granted to those entities.
In the case of foreign-flag vessels, the privilege came as a fishing permit that allowed them to operate in U.S. waters. That was before the Magnuson Act. In the case of foreign-controlled vessels, the privilege is in the form of a fishery's endorsement—a piece of paper issued by an administrative officer that allows them to operate in U.S. waters as U.S. vessels. As with the original Magnuson Act and the 1987 Anti-Reflagging Act, S. 1221 would not take anyone's vessel or prevent them from using it anywhere in the world with the proper fishery's endorsement.
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It's ironic to me that some of the same factory trawler owners who now argue that their permits cannot be revoked, 2 years ago told us—when arguing for IFQs, Individual Fishing Quotas—that fishing was a privilege which could be revoked without compensation. These people have gone each way on several issues.
With respect to IFQs, Congress should make clear that there will be no IFQs ever issued to foreign interests in our waters. That ought to be another thing we did not do that you should consider. Put the marker down now and state to everybody that if we go the IFQ route, there will be no foreign fishing IFQs in our water.
Now the last chart I said was the last, but I'm mistaken. There is another chart, chart 7. It showed what happened to the Bering Sea pollock fishery since the foreign rebuilds entered. The allowable biological catch, which is called ABC, has declined by one-third, meaning there are one-third fewer fish to catch. And the Council, now, because of the pressure of all of these vessels, has eliminated what we call the buffer between that allowable biological catch and the total allowable catch, which is the TAC. So now, that if the ABC accidently gets set too high, the fleet will have already exceeded what should be the maximum catch.
All of these mechanisms were designed to protect the fish, the reproductive capability of these fisheries—not to protect fisherman, not to protect who owns the vessel at any length, but to protect the reproductive capability. And because of the pressure of this overcapitalization the Council, now, has been forced to eliminate one of the basic protections for the species themselves, and that was the buffer. The decline in the allowable catch may be part of a normal stock cycle, but the shift to a riskier management practice is probably the direct result of the increased capital and harvesting capacity that go back to these erroneous rulings that I've mentioned.
Now, ladies and gentlemen, you've been very patient with me. I can't tell you how chagrined I am to have to come and confess that when we marked up that bill, we just didn't do a good job. We should have closed that door, and we should have been very plain about what rebuild was. And when we said, ''to the owner,'' we should have said, ''to the original owner,'' to the owner who submitted the papers at the time that the exemption was sought; but we didn't. In other words, this is not something for the courts to deal with; its not something—and by the way, the Court of Appeals said it was something for Congress to deal with. We should have done it more specifically, and we need to now go back and do what we intended to do—assure that only U.S. flag vessels that are built in the United States can, in fact, be flagged as U.S. vessels to harvest a portion, the American portion, of the fisheries within our 200 mile limit.
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And I commend you again, ladies and gentleman. I hope that you will pursue it. There are several other things here that I could mention about this issue, but I think, in the interest of time, I'll see if you have any questions of me. It is to me, the most serious thing that faces our great North Pacific fishery, and I'm saddened that it's viewed by some as being Alaska versus the State of Washington issue. It is not. And if anyone's got any solution to help us prove that, I'd be glad to explore any solution. We are not taking any of these vessels out on the basis of where their home port is, or anything. We're looking to take them out on the basis of whether they fraudulently came into the fishery. And I hope that you'll address it from that point of view.
Thank you very much, Mr. Chairman.
[The prepared statement of Senator Stevens follows:]
STATEMENT OF HON. TED STEVENS, A SENATOR IN CONGRESS FROM THE STATE OF ALASKA
Thanks to Chairman Young and Subcommittee Chairman Saxton for allowing me to testify today.
The matter you are about to consider is of great importance in the U.S. fisheries, and particularly in the fisheries off Alaska. By the time you conclude today, it is my hope you will be convinced, as I was, that legislation is greatly needed.
My first chart (chart 1) illustrates why Congress passed the Anti-Reflagging Act. From 1984 to 1987, foreign-flag fishing was being phased out of the EEZ under the Magnuson Act. In 1986 we realized that nothing in Federal law prevented the foreign-flag vessels from simply reflagging to the U.S. flag. The goals of the ''Commercial Fishing Industry Vessel Anti-Reflagging Act of 1987'' were therefore: (1) to require the U.S.-control of fishing vessels that fly the U.S. flag; (2) to stop the foreign construction of U.S.-flag vessels under the existing interpretation of the term ''rebuild''; and (3) to require U.S.-flag fishing vessels to carry U.S. crews.
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Of these goals, only the U.S. crew requirement was achieved. We did not stop foreign interests from owning and controlling U.S.-flag vessels. In fact over 29,000 of the 33,000 U.S. flag fishing vessels in existence are not subject to any controlling interest requirement. We also failed to stop the massive Norwegian shipbuilding program between 1987 and 1990 that allowed about 20 of the largest fishing vessels ever built to come into our fisheries.
Today, half of the nation's largest fishery—Bering Sea pollock—continues to be harvested by foreign interests on foreign-built vessels that are not subject to the U.S.-controlling interest standard. Therefore, while the white bars in the later years on the chart are labeled ''domestic,'' half of each could still correctly be labeled ''foreign.''
On September 25, 1997, I introduced the American Fisheries Act (S. 1221) to fix these mistakes. Senators from just about every fishing region of the country have joined me in support of this measure. (Cosponsors include Senators Breaux (Gulf); Hollings (Southeast); Gregg (Northeast); Wyden (West Coast) and Murkowski).
Foreign Ownership
S. 1221 would eliminate the foreign ownership loophole the Coast Guard interpreted into the Anti-Reflagging Act. Congress provided a grandfather in that Act to allow vessels whose owners did not meet the new 51 percent standard to continue to fish until they sold the vessel. Once the vessel was sold, it was intended to have to comply with the controlling interest standard. The Coast Guard misinterpreted this grandfather to ''run the vessel.'' While the DC Court of Appeals upheld this Coast Guard reading, all sides agreed that the practical result was absurd given Congress' primary intent of eliminating foreign control.
My next chart (chart 2) indicates why I believe the Coast Guard took the position it did. In the three months after the Anti-Reflagging Act became law, the Coast Guard Vessel Documentation Office began issuing letter rulings that granted permanent U.S. ownership waivers. The letter rulings were signed by the Chief of the Vessel Documentation Office, who, according to the Coast Guard, was not required to get any other clearance in issuing the letters. About three-quarters of the rulings were issued in response to requests from two attorneys, one of whom was a former employee of the Documentation Office.
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As the chart shows, by the time a Coast Guard legal opinion was prepared on December 19, 1988, the Documentation Chief had granted at least 9 permanent waivers. This December 1988 legal analysis—prepared by the Chief of the Coast Guard Maritime and International Law Division—correctly concluded that the grandfather provision could only be interpreted to apply to the current owner of a vessel. Nevertheless, the Documentation Branch continued to issue letter rulings granting permanent exemptions.
Almost two years later, on November 16, 1990, the Chief of the Coast Guard Operational Law Enforcement Division wrote a memo asking why the earlier legal opinion was not being followed. By that time, the Documentation Office had issued at least 13 permanent waivers. For reasons still not clear, the Coast Guard ultimately ignored the Maritime and International Law Division memo. In its final rule—two years after the letter rulings—the Coast Guard read the grandfather provision to run with the vessel. We've since learned that the Coast Guard did not provide the Maritime and International Law Division opinion to the either the district or appeals courts during the law suit which it won.
At our hearing in March, I called on the General Accounting Office to investigate these Coast Guard actions. The GAO will deliver its report in mid-July, and I expect it will be helpful in ensuring that similar mistakes are not made again by the Coast Guard. For instance, the Coast Guard informed us that the letter rulings were permitted by the Administrative Procedures Act, and perhaps that should be changed.
S. 1221, however, does not seek to make these kinds of changes—it seeks to correct the negative effects by the Coast Guard's actions. S. 1221 would eliminate all exceptions to the U.S.-controlling interest requirement, and would raise the standard from 51 percent up to 75 percent, the same standard as other vessels operating commercially in U.S. waters.
Unlike the Jones Act, the system under our fisheries law is really a preference system for U.S. fishing interests, not an outright prohibition on foreign boats. The Magnuson Act (and Law of the Sea) require that foreign-flag vessels be allowed to harvest the portion of any U.S. catch that U.S.-flag vessels can't harvest. Without a meaningful controlling interest standard, there is no way to give U.S. interests the fishing preference envisioned under this law.
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Under S. 1221, vessel owners would have 18 months to comply with the new controlling interest standard, and could be sold or otherwise transferred to meet the requirements. The Maritime Administration, instead of the Coast Guard, would review company documents for compliance. MarAd already has expertise in this kind of work through the Federal loan and subsidy programs for ocean carriers that it administers.
Fishing vessels under 100 tons—which tend to be owner-operated—would continue to demonstrate compliance as they do now (with a simple form). Fishing vessels over 100 tons—of which there are about 3,500—would be reviewed annually, as well as whenever a new owner acquires more than 5 percent ownership.
Even if we enact S. 1221 today, it will have taken a quarter century to achieve the Americanization we envisioned in 1976.
Foreign Rebuilds
The second major component of S. 1221 would correct for the Coast Guard's misinterpretation of the foreign rebuild grandfather.
Prior to the Anti-Reflagging Act, Federal law allowed U.S.-flag fishing vessels to be ''rebuilt'' in foreign shipyards. Under the Coast Guard's interpretation of ''rebuild,'' a vessel could be essentially built in a foreign shipyard so long as some portion came from a U.S. hull. To illustrate how extreme a ''rebuild'' could be, my next board (chart 3) shows the vessel ACONA—which was 74-feet long and 167 tons before being rebuilt in Norway.
Take a good look—the board after (chart 4) shows the ''ACONA'' upon the completion of its rebuild. It measures 252 feet and over 5,000 tons, and is now called the AMERICAN TRIUMPH. This is no reasonable way to call this the same vessel. This particular vessel is currently under investigation by the Coast Guard because documents used in obtaining the rebuild waiver may have been back-dated. This is one of about 20 so-called ''rebuilt'' vessels that now fish in the Bering Sea.
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The Anti-Reflagging Act amended title 46 to prohibit U.S.-flag fishing vessels from being rebuilt overseas. Unfortunately, it also included a grandfather provision for 6 vessels for which legitimate investments had been made. The grandfather provision allowed a vessel to be rebuilt in a foreign yard and still qualify for the U.S.-flag if (1) the U.S. hull was purchased by July 28, 1987; (2) a contract for rebuilding was signed within 6 months of the enactment of the Anti-Reflagging Act; and (3) the vessel was ''redelivered to the owner'' by July 28, 1990.
We specifically required the rebuilt vessel to be delivered to the owner of the U.S. hull in order to discourage speculators from buying U.S. hulls during the time we were working on the bill. Unfortunately, the Coast Guard did not require the same owner to receive the rebuilt vessel—and the speculation we sought to prevent became quite great.
My next chart (chart 5) shows the speculative contracts for U.S. hulls signed between the original House markup (June 9, 1987) and the rescheduled markup July 28, 1987 which became the cutoff date for contracts on U.S. hulls that could be rebuilt. Contracts for at least 13 vessels were signed in those six weeks—including 4 on the day before the markup. As you can see on the chart, like the ACONA, these vessels were ''rebuilt'' into massive fishing vessels (see increases on the chart).
S. 1221 would correct the problems created by this unintended influx of capacity by requiring some of those vessels to leave. S. 1221 would not—as some have suggested—eliminate all of factory trawlers or even all of the factory trawlers that came through the rebuild loophole. It would remove from the fisheries only half of the rebuild vessels that continued to be foreign-controlled on September 25, 1997 (the day of introduction).
From records we have, it appears that 18 vessels were speculative (where the original owner of the U.S. hull did not receive delivery of the rebuilt vessel). Of those 18, only 13 appear to have been foreign-owned on September 25, 1998. Of the 13 foreign-owned boats, three already have left the fisheries (reflagged to fish in Russia). Under S. 1221, the remaining vessels (we believe 10) would have to find a vessel of equal or greater size to surrender its U.S. flag in order to continue flying the U.S. flag.
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This was a more lenient approach than requiring all of the speculative vessels to leave the fisheries. It would make the current owners of the vessels that caused the overcapitalization problems responsible for fixing the problems—but with the potential for some to remain in the fisheries. The foreign rebuild provisions of S. 1221 would likely result in only 5 factory trawlers leaving the Bering Sea fisheries—and allow 50 to 55 factory trawlers to remain, provided they comply with the U.S.-controlling interest standard. We thought this, under the circumstances, was very fair—we bent over backwards to be fair. Since September I have seen clearly that the people who brought these vessels in knew exactly what they were doing—and that they were evading Congressional intent.
As my next chart (chart 6) shows, the foreign rebuild grandfather was implemented by the Coast Guard in much the same way as the ownership grandfather. At least 13 rebuild waivers were granted before a final rule was promulgated—essentially foreclosing the possibility of correctly interpreting the provision. As with the ownership grandfathers, the ruling letters were issued primarily by the Chief of the Vessel Documentation Office, and the majority were issued to two attorneys, one of whom was a former employee. When you finish your review today, perhaps you will conclude that we should remove all of the speculative vessels that came through loophole and that continue to be foreign owned.
Large Vessel Moratorium
There are some interesting views on the final major component of the bill. In S. 1221, we called it the large vessel ''phase out.'' No new fishing vessels greater than 165 feet, 750 tons, or 3,000 shaft horsepower would be allowed into the fisheries. Fishing vessels above any of these thresholds that were already in the fisheries on September 25, 1997 could stay for the useful life of the vessel—provided they meet the controlling interest standard, and don't surrender their fishery endorsement.
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This ''phase out'' could as easily be called a ''moratorium.'' The measure would not only prevent new boats from entering, but would prevent former-U.S. flag vessels from coming back into the U.S. fleet. After the Senate hearing, I said I would be willing to consider allowing the Councils to override the moratorium—even though I've yet to hear of a single U.S. fishery that needs or wants any more large fishing vessels. I should mention that the bill includes a special measure for the Atlantic herring and mackerel fisheries, in part because a factory trawler recently modified overseas obtained a fishery endorsement before the control date in S. 1221.
Closing
Before concluding, I will comment on the suggestion that this bill would constitute a taking. It was not a taking when we phased out foreign-flag vessels in the early-1980's, and it will not be a taking when we remove foreign-controlled vessels who happen to fly the U.S. flag. In both cases, we are eliminating a privilege the United States granted to those entities.
In the case of foreign-flag vessels, the privilege came as a fishing permit that allowed them to operate in U.S. waters. In the case of the foreign-controlled vessels the privilege is in the form of a fishery endorsement that allows them to operate in U.S. waters. As with the original Magnuson Act and the 1987 Anti-Reflagging Act, S. 1221 would not ''take'' anyone's vessel or prevent them from using it anywhere else in the world.
It's ironic to me that some of the same factory trawler owners who now argue their permits can't be revoked, two years ago told us—when arguing for IFQs—that fishing was a privilege which could be revoked without compensation. And with respect to IFQs, Congress should make clear that there will be no IFQs issued to foreign entities.
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My final chart (chart 7) shows what has happened in the Bering Sea pollock fishery since the foreign rebuilds entered: (1) the ''allowable biological catch'' (ABC) has declined by a third—meaning there are fewer fish to catch; and (2) the Council has eliminated the buffer between the ABC and the ''total allowable catch'' (TAC)—so that now if the ABC accidentally gets set too high, the fleet may already have exceeded what should have been maximum catch. The decline in the allowable catch may be part of the normal stock cycles, but the shift to a riskier management practice is probably the direct result of the increased capital and harvesting capacity stemming back to the early-199Os.
Mr. Chairmen and Committee members, I appreciate the time you have taken to listen to me, and commend you for addressing these important issues today.
INSERT OFFSET FOLIOS 1 TO 7 HERE
Mr. SAXTON. Senator Stevens, thank you very much for the very thorough, and explicit, and articulate testimony.
And first, I ask unanimous consent that Mr. Delahunt and Mrs. Smith be permitted to sit on the panel. Thank you very much.
Second, let me thank you, Senator, for including the provisions of the House bill relative to the northeastern part of the country, and specifically the ship that we referred to, in the language, I believe is the ATLANTIC STAR. We appreciate very much your including those provisions in your bill. We think that's of great importance, particularly to Mr. Delahunt and I, and Mr. Pallone, and other Members of the Congress who represent sections of the northeast.
I'd just like to make one point if I may, and then I'm going to ask Mr. Young for his questions or comments. I'd like to try to help clear up this issue regarding property rights. You spoke very eloquently, and I understand what you said, and I agree with you. I would just like to underline this and perhaps you can respond to this statement. On February 28 of 1995, the American Factory Trawler Associations wrote to the Chairman of the Full Committee, Mr. Young. And I have a three-page letter signed by Joseph Blum, the executive director. And I might add that the American Factory Trawler Association is represented here today by Jim Gilmore. They are now called the At Sea Processor's Association, so they'll have a chance to comment on this as well. In addressing the issue of ITQs, there's an interesting passage—statement here on page 2 of this letter. In speaking to what Congress ought to do relative to a number of issues involving the North Pacific fisheries, and they are addressing the issues of ITQs. And they say, and I'll quote this, ''Specifically,'' they say, ''Congress should clarify that a quota share issued to a person under a ITQ program is not a property right. Under the ITQ program, an individual is provided with a privilege of harvesting a percentage of the annual allowable catch.'' This is the American Factory Trawlers Association which I believe today may be taking a different view.
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I would just like you, if you would, sir, Senator, to comment on this statement and how you see it in the context of our discussion today.
Senator STEVENS. Well, Mr. Chairman, I think you're correct that the group that represents the factory trawler have taken all three sides of that same issue. On CDQs, IFQs, and on the fishery's endorsement, they, on one hand, argue that it is a property right. On the other hand, when it's convenient, argue that it's just a privilege. It just depends on what they want in terms of what the constitutional provision means as far as I'm concerned. They have not addressed this issue, I think, fairly on a legal basis. There is no constitutional right; there is no taking of any property right here. I know of no one that previously had claimed that about a fishery's endorsement issued by the Coast Guard. And as such, I just hope the Committee and the Congress will ignore this new argument.
Mr. SAXTON. If fishery quotas or fishing privileges were property rights, we'd have a hard time regulating fisheries at all, wouldn't we?
Senator STEVENS. You're right. As a matter of fact, the Regional Councils under the Magnuson Act can take those down and can stop them from exercising those rights at any time. If they were property rights, they could not do that without compensation. But the Regional Fishings Councils have been doing that since day one under the Magnuson Act because they set the allowable catch, and they tell you how much that endorsement is worth in each year. And the Act, as well as the Law of the Sea, contemplates that that because they're both provisions to protect the fish—not protect the fishermen or any vessel. Now, their argument would mean that a vessel that acquires such an endorsement has a greater right than an American-built vessel. Think of that, Mr. Chairman. There is no such concept involved, that I know of, in constitutional law.
Mr. SAXTON. Senator, thank you very much.
Mr. Young.
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Chairman YOUNG. Thank you, Mr. Chairman.
Before you leave, Senator, I'd like to have both of the two pictures of the so-called rebuilt ship. I want to leave those here and remind each member, that is a classic example of what was not intended. Because other than the Senator and myself, we're the only two that were here. We knew what we were intending to do, and now to have that abused as was done is just absolutely beyond my comprehension. You know, I have hundreds, Senator—and I know you do, too—of people coming in and asking for changes in the Jones Act; we need documentation to get our vessel out of Canada, for instance. The Coast Guard said you can't do it. And this is the example I think of malfeasance, if I've ever seen it.
And, Senator, one question—and I want to thank you for your testimony——
Senator STEVENS. Congressman?
Chairman YOUNG. Yes.
Senator STEVENS. May I interrupt just—sir, attached to each one of the statements we've provided you, are a black and white——
Chairman YOUNG. There's something about—maybe it's the maturity—there's something about a little picture and a big picture.
Senator STEVENS. Oh.
Chairman YOUNG. I would rather look at the big picture, believe me.
Senator STEVENS. Senators have the trouble of seeing the big picture every once in awhile.
[Laughter.]
Chairman YOUNG. OK. The other thing is, to your knowledge, Senator, is there any fishing in any State that it is a right, other than the Indian treaties? That all fisheries, to your knowledge, within the three-mile limit are managed by the State Fish and Game; is that correct?
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Senator STEVENS. That's correct.
Chairman YOUNG. Nobody has the right. They can shut it down. Let's go beyond the three-mile limit. What happens if the Council changes the size of the net from an eight-inch net which they used to use, to a two-and-one-half-inch net, or from a two-and-one-half-inch to eight-inch net? Would that be a taking, for instance?
Senator STEVENS. Absolutely not. As a matter of fact, look at the foreign factory trawlers; they argued before the Council and got a ruling of the Council that changed the allocation of fish. It used to be 65 percent onshore, 35 percent offshore. Now, it's 65 percent offshore and 35 percent onshore. In other words, the Council, in its ruling, put more than half of the boats that were fishing or bringing the fish back to shore put them on the beach. Now that wasn't deemed to be a taking. They're arguing right now before the Council for a larger allocation of this fish.
Chairman YOUNG. All right. I'm——
Senator STEVENS. All the endorsement gives you is the right to take the amount of fish the Council says you can take.
Chairman YOUNG. All right.——
Senator STEVENS. How can that be a property right?
Chairman YOUNG. Senator, if I'm an onshore processor. And if the Council determines I'd get 50 percent of the fish for example. The Council rules that instead of my getting 50 percent, I get 35 percent; it goes to the offshore trawl fleet. That is not considered a taking from me. But under their premise, it would be a taking. Is that correct?
Senator STEVENS. Well, they consider it to be a taking when we say that they have to give up the rights they acquired through the improper interpretation of the law. Now that is on another phase of this question of constitutionality. That flag that they get, you can see how temporary it is. They have voluntarily given up—if they just go across the line and start fishing in Russia, they give up that right. Now if it's a property right, how can Congress provide it just by going across an imaginary line? They lose that constitutional right. Their property right argument is just full of holes. It has never been a property right. And I do not understand——
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Chairman YOUNG. Again, Senator, I know what this is. This is an attempt to what we call ''muddy the water,'' not ''tongue in cheek.'' There is something really fishy about that argument, and I hope we are able to beach it so it never swims again.
Thank you, Mr. Senator.
[Laughter.]
Senator STEVENS. Well, let me tell you, Congressman, these vessels, if we take their flag away from them, they can still fish in U.S. waters at any time that any Council says that the American effort is not sufficient to harvest all the fish. We have not taken away the right to fish; we've just taken away their privilege to fish as a U.S. flag vessel when they really are foreign-built, foreign-operated vessels.
Mr. SAXTON. Thank you.
I believe Mr. Farr has some questions.
Mr. FARR. Well, thank you very much, Mr. Chairman. I appreciate you having this hearing and request that my remarks be submitted in the record.
And I really want to thank the Senator for being here. This is the International Year of the Ocean. Next week is the National Oceans Conference out of my district in Monterey—and a district that you are familiar with because I understood you spent some years at Fort Ord there—and I appreciate the connection. It's also very interesting because Monterey used to be the largest sardine port in the world. And we lost that fishery because we never paid attention to what happens if you don't manage the fisheries.
And I think often people forget that our responsibility as elected Members of Congress—and frankly, it's only our responsibility because State legislators and local governments can't do it—is to protect the resources of this country which have been declared to be the fisheries out to 200 miles. I mean, in sense, the Law of the Sea Treaty recognizes that all ocean politics are local.
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And I appreciate the fact that you're bringing this legislation and this issue to us because if we don't—the bottom line is really fisheries management. And this goes in to how you better manage the fisheries so that there is not an unusual amount of harvesting or harvesting that we can't control, and that that benefit of that doesn't inure to American businesses; that we have been a country that has always looked at the bottom line, and I think that often in resources, we forget that the bottom line is one that really needs to be managed appropriately.
And as far as this idea that anything we would do in this area in regards to taking or—I'd like to remind the Members of Congress that in where you have local fisheries in the States—the State that I come from, California, we've banned gill nets, and there was no takings issue in that. We have required limited entry in numerous fisheries, and there was no takings in that. We have required trawlers to have new gear that is—and we have provided the loan program so that they can transfer from old technology to new technology; there was no takings in that.
I agree with the Senator; this is not a takings issue. To go in and fish in American fisheries is a privilege, not a right. And that privilege is extended by law that is created by this Congress. And I think if we don't pay attention to the fact that we need to be on top of that law, making sure that that law is a wise law, smart law, is law that really does the best we can to regulate a fishery, then we are losing perspective of what we are here elected to do. So I appreciate you bringing this bill to this Committee. And I look forward to working with you on it.
Senator STEVENS. Thank you very much. In years gone by, Senator Magnuson sent me to the Law of the Sea Conference. I had known him for many years before I came to the Senate. He had wanted me to go to the Law of the Sea Conference to represent the Congress committee when he was chairman, and I was a minority member.
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I came back and told Warren that I thought that the major issue facing us was the jurisdiction beyond the three-mile limit, and we prepared to draw up—and I drafted the first Magnuson Act and introduced it as a matter fact. Warren made it his bill when he wanted to get it passed, and I think that was the way we got it passed. He was the chairman, and I respected him very greatly, but what I'm telling you is we were not looking at any kind of conflict between States or between anyone, we were looking to try and satisfy the objectives of the Law of the Sea. And when we adopted the concept of the 200-mile limit, the world did.
Mr. FARR. That's right.
Senator STEVENS. But it adopted it with the Law of the Sea concept that the Nation didn't have the capacity to harvest within the 200-mile limit, it had to allow foreign vessels to come in and harvest up to the allowable quota. Now that provision that came out of the Law of the Sea is what inhibited us when we wrote the Magnuson Act. We couldn't go against what we'd argued worldwide, so we said if we find that there's any place where we cannot harvest it with American fleets, we must allow the foreign fishing vessels in. And for the first 7 or 8 years—we've given you the chart—after the Magnuson Act passed, the foreign vessels continued to harvest within our waters.
These people that came in later, whether they are U.S. flags or foreign flags, they have no property right within that 200-mile limit, as you rightly state. And these people now that are foreign built, foreign dominated, they're arguing that our Constitution protects their right because they came in under our flag. But our own flag people don't have that right. Well I hope that everybody keeps that in mind.
Thank you very much.
Mr. SAXTON. Senator, thank you very much. We very much appreciate your being here and your willingness to spend this amount of time with us. We have two other panels to deal with here this morning, so at this point, unless you have something further, we will move on to our second panel. And thank you, again, very much.
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Senator STEVENS. We welcome your interest greatly, Mr. Chairman, and all of your patience with me. Thank you very much.
Mr. SAXTON. Thank you, sir.
I will now introduce our second panel. We have Dr. David Evans, the Deputy Director of the National Marine Fisheries Service, and Rear Admiral Robert C. North of the U.S. Coast Guard.
STATEMENT OF DAVID EVANS, DEPUTY DIRECTOR, NATIONAL MARINE FISHERIES SERVICE, DEPARTMENT OF COMMERCE
Mr. SAXTON. While you are coming forward to take your seats, and before we hear your testimony—Dr. Evans, prior to your testimony I have one question which I'd like you to respond to if you don't mind. The Subcommittee submitted budget questions to your agency on March 27, 1998, and asked for a response by April 17, in order to permit us to include these responses in today's record. Now, June 4, 1998, almost 2 months later, and we still haven't seen responses to the questions. What has been the hold up, and when will we receive these responses?
Dr. EVANS. Mr. Saxton, the answers to those questions are right now at OMB, and I am told that they will be released almost immediately. But I don't know the exact day.
Mr. SAXTON. Well, we would appreciate whatever you can do to break the answers to those questions loose because we believe that they are extremely important. And OMB has apparently had them for quite some time, and has failed to release them. Is that correct?
Dr. EVANS. Yes. There's been some discussion back and forth between the Department and OMB on these questions to get them to you. We're very much aware of the importance of your having that information so that you can continue with this year's process, and we are working very hard to get them to you.
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Mr. SAXTON. Do you know roughly how long OMB has had your responses?
Dr. EVANS. No, I don't, sir.
Mr. SAXTON. OK. Thank you very much. You may proceed, Dr. Evans, to give your testimony. We are about an hour and 15 minutes into this process, and so we are going to abide by our 5-minute rule for the second and third panel, so if you would proceed to try to stay within the 5 minutes, we would appreciate it. Those little lights there in front of you will help you understand or know when the time limit has expired. So, proceed, sir.
Dr. EVANS. Thank you very much, Mr. Chairman, members of the Committee. I'm pleased to be here today to present the views of the Department of Commerce on the Americanization of the U.S. fishing fleet and U.S. ownership of fishing vessels.
Before I focus on the Americanization issue, I'd like to comment on the overcapacity and overcapitalization issue that was raised in your letter—it was noted in your letter. It's increasingly evident that excessive investments in harvesting capacity can contribute to resource overutilization in fisheries. Both domestically and internationally, there's little doubt that a significant number of our most valuable commercial fisheries are burdened with excessive levels of investment and harvesting capacity. The most obvious domestic examples of these problems are New England groundfish and scallop fisheries, the West Coast groundfish fishery, and the Alaska crab fishery.
The National Marine Fisheries Service is involved in both international and domestic activities that will help us better manage capacity in the fishery sector. Internationally, we're working with the Department of State on an initiative sponsored by the Fish and Agriculture Organization of the United Nations on managing harvesting capacity throughout the world. At home, NMFS has sponsored vessel and permit buyout programs in New England, Texas, and the Pacific Northwest and is currently working with both the Pacific and North Pacific Councils to review the first industry-funded buyout programs developed under the new authority for fishing capacity reduction under the Magnuson-Stevens Fishery Act. We believe that the Councils provide an appropriate mechanism for evaluating the best ways to maximize the benefits to the industry while minimizing potential costs or social impacts from capacity reduction efforts.
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Now, let me address the main matter for today. The Committee has requested the Department's evaluation of the Americanization of our coastal fisheries. We use the term ''Americanization'' to mean actions taken to ensure that the benefits derived from the use of the U.S. Exclusive Economic Zone (EEZ) resources are effectively channeled to U.S. enterprises and citizens. This effort began in earnest with the passage of the original Fishery Conservation and Management Act in 1976. The goals of the FCMA were to phase out foreign fishing off U.S. coasts, expand domestic capacity, optimize domestic benefits, achieve optimum yield, and enhance economic and employment opportunities. In addition to establishing the 200-mile EEZ, the Act directed the Secretary of Commerce to provide the domestic fishing industry priority access to the fishery resources in the EEZ.
In 1979, the Department undertook a major effort to study the social costs and benefits of accelerating utilization of fishery resources in the EEZ. Based on these findings, the White House established a fisheries development policy which stated that significant opportunities for industry expansion existed and that partnerships between local, State, and Federal governments in the fishing industry were needed.
This policy led to the enactment of the American Fisheries Promotion Act of 1980 which was directed toward expanding commercial and recreational fishing efforts in underutilized fisheries. The amendments specifically authorized financial assistance to industry, supported the development or expansion of market opportunities for U.S. fishery products, and allowed foreign access to fishery resources in exchange for ''chips,'' including trade concessions, technology transfer, and so on.
In 1982, the Processor Preference Amendment gave U.S. processors preference over joint venture processors for fishing allocations, and accelerated the phaseout of joint venture processing.
Finally in 1987, the Anti-Reflagging Act sought to tighten domestic ownership requirements by increasing the minimum domestic share to 51 percent. These actions had greatly Americanized fishing operations by the end of that decade.
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One way to determine whether the goal of Americanizing the U.S. fishing fleet has been achieved is to review the level of foreign fishing in the EEZ under Governing International Fisheries Agreements, GIFAs. The United States currently has GIFAs in force, or is taking steps to extend GIFAs, with Estonia, Latvia, Lithuania, China, Poland, and Russia.
At present, the only foreign fishing activity occurring within U.S. jurisdiction is joint venture processing of U.S. harvested fish off the northeast coast. We permitted joint venture processing for Atlantic mackerel and herring by two processing vessels from Estonia and two others from Lithuania. The total amount of fish available for these activities is 15,000 metric tons of mackerel and 40,000 metric tons of herring.
Finally, we've also issued transshipment permits under section 204(d) of the Magnuson-Stevens Act to one vessel each from Cambodia, Russia, and Panama to receive and transport processed mackerel from those operations. In addition, last year we issued transshipment permits to 14 Canadian herring transport vessels operating in the Gulf of Maine.
While the Department can state that Americanization of the U.S. fleet has been achieved, based on the relatively low GIFA-related fishing activity, it cannot provide the Committee with a clear picture of the ownership structures of the U.S. fishing fleet. The 1987 Anti-Reflagging Act applied only to vessels documented after the date of enactment. However, it's clear that significant foreign participation remains because our maritime and cabotage laws enable foreign firms to retain and even increase ownership shares in some segments of the U.S. fishing fleet. Approximately 25,000 fishing vessels documented prior to the enactment of the Anti-Regflagging Act are exempt from the ownership requirements of that statute. And we have no certain information on their present ownership.
The Department applauds the Committee for its efforts to deal with national policy issues on excess harvesting capacity and Americanization. However, our fisheries are highly diverse and vary substantially in the nature of the fishing vessels deployed in different fisheries. Our limited knowledge suggests that foreign investment differs markedly from region to region. While it would be appropriate for Congress to continue with the established trend of Americanizing U.S. fisheries, I'd urge you to carefully examine any retroactive application of the ownership requirement. Such measurements could have unintended impacts on those sectors of the industry currently exempt from ownership requirements or on those that rely on foreign investment. The retroactive application of the ownership requirements could also raise concerns about compliance with U.S. obligations to foreign investors under a variety of international treaties.
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The National Marine Fisheries Service is prepared to work with the Councils, the fishery constituencies, and Congress to determine the most appropriate course of action for our Nation's fishermen and fisheries. It is the Department's desire to reduce levels of harvesting capacity among all classes of fishing vessels to levels that are matched with sustainable use of our resources and that maximize the economic benefit to our Nation.
Mr. Chairman, this concludes my remarks, but I'm prepared to respond to any questions that you might have. Thank you very much.
[The prepared statement of Dr. Evans may be found at end of hearing.]
Mr. SAXTON. Admiral North, you may proceed.
STATEMENT OF REAR ADMIRAL ROBERT C. NORTH, U.S. COAST GUARD, DEPARTMENT OF TRANSPORTATION, ACCOMPANIED BY THOMAS WILLIS, UNITED STATES COAST GUARD
Admiral NORTH. Yes, sir. Good morning, Mr. Chairman, members of the Committee, I am Rear Admiral Bob North, the Assistant Commandant for Marine Safety and Environmental Protection. I am pleased to represent the Coast Guard before this Subcommittee today to discuss the Americanization of the U.S. fishing fleet. With me to my left is Mr. Tom Willis, who is the Director of the Coast Guard's National Vessel Documentation Center.
The Anti-Reflagging Act was designed to prohibit the reflagging of foreign-built vessels for participation in U.S. fisheries. It harmonized fisheries and maritime laws, by generally imposing requirements regarding the documentation, ownership, manning, and construction of vessels engaged in the fisheries trade similar to those imposed on vessels engaged in the coastwise trade. The Act also broadened the definition of fisheries to include processors and tenders.
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Prior to enactment of Anti-Reflagging Act, it was possible to use foreign-built and 100 percent foreign-owned fish processing vessels to participate in U.S. fisheries. As a result of the Anti-Reflagging Act, fishing vessels today are required to have a certificate of documentation with the fishery's endorsement, must have 51 percent of their stock owned by U.S. citizens, except for vessels that are grandfathered from the American control provisions of the Anti-Reflagging Act.
Two portions of the Anti-Reflagging Act prove problematic. These are the grandfather provisions intended to protect the interests of investors already committed to the U.S. fisheries, and deal with foreign rebuilding and ownership. I will address each separately, because each has a different impact on the Americanization of the U.S. fishing industry.
Prior to the Anti-Reflagging Act, fishing vessels had to be built in the United States, but could be rebuilt abroad. The Act, among other things, prohibited vessels seeking fishery endorsements from being rebuilt in foreign shipyards. However, the rebuild grandfather provision in the Act exempted vessels that were built in the U.S. before July 28, 1987, and rebuilt in a foreign country under a contract entered into before July 11, 1988, and also purchased or contracted to be purchased before July 28, 1987, with the intent to use the vessel in the fisheries. The rebuilding grandfather provision also required that a vessel rebuilt under the above circumstances had to be redelivered to the owner before July 28, 1990. The window of eligibility for this exemption has long passed, so no additional vessels may be rebuilt outside of the United States and enter or reenter the U.S. fishery. Furthermore, no additional foreign-built vessels may be documented for use as fish processors.
As mentioned earlier, the Act requiring a fishing vessel to be owned by a majority of U.S. citizens. Under the grandfather provision, the required 51 percent of U.S. ownership does not apply if before July 28, 1987, the vessel was documented and operating as a fishing vessel in the Exclusive Economic Zone or as contracted for purchase for use as a fishing vessel in the U.S. fisheries.
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The ownership grandfather provision of the Anti-Reflagging Act has been the subject of much controversy. The Coast Guard, following careful examination of the law, concluded that based on the plain language of the statute the grandfather provision ran with the vessel. Although this was seemingly contrary to the purpose of the law, grandfather provisions by their very nature run contrary to the overall purpose of a statute.
Recently, the Senate began consideration of the American Fisheries Act of 1998, S. 1221, a bill which among other things directly addresses the problems that arose as a result of the ownership and rebuild grandfather provisions of the Anti-Reflagging Act.
First, S. 1221 would repeal the ownership grandfather effective 18 months after enactment. In addition, it would increase the American control provision for entities owning fishing vessels from 51 to 75 percent. Entities currently owning documented fishing vessels and which meet the majority American control provisions of the Anti-Reflagging Act would have 18 months to conform to the new standard. A proposed ownership standard would place fisheries on a par with the ownership standard for coastwise trade.
Additionally, S. 1221 would also provide for the orderly phase out of larger vessels, including all of the processing vessels known to have been deemed grandfathered from the rebuild prohibition of the Anti-Reflagging Act. This would remove the remaining 20 vessels which were rebuilt foreign under the grandfather provision of the Anti-Reflagging Act.
The Coast Guard appreciates the opportunity to testify about this important matter and stands ready to work with the Congress on this issue. I'd be pleased to answer any questions that you may have, sir.
[The prepared statement of Admiral North may be found at end of hearing.]
Mr. SAXTON. Admiral, thank you very much.
I understand, Mr. Willis, you're here just to respond to questions. You don't have any testimony? OK, thank you.
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As you noted, we are now into the second bells of our vote. We're going to go vote. There are 2 votes, so we'll be 20 minutes or so before we get back. And at that time, we'll begin with our questions. Thank you.
[Recess.]
Mr. SAXTON. I would like, at this time, to turn the floor over to Mr. Young for his questions.
Chairman YOUNG. Thank you, Mr. Chairman.
Dr. Evans, does the administration believe the United States has the right to restrict the harvest of U.S. fisheries resources by foreign vessels?
Dr. EVANS. Does the United States believe that we have the right to restrict the—yes, sir.
Chairman YOUNG. You do?
Dr. EVANS. Yes, under the Magnuson Act. Yes, sir.
Chairman YOUNG. OK. I want to make certain that that is clear for the record.
Does it concern NOAA, the agency responsible for managing and conserving in our fisheries resources that there's approximately 29,000 U.S. fishing vessels for which there is lack of knowledge about ownership?
Dr. EVANS. Well, it can concern us on a couple of grounds. Principally, we're responsible for managing the resource, looking out for biology of the resource, and dealing with the enforcement of the regulations that are promulgated, initiated by the Councils. And from a practical perspective, we apply the same kind of enforcement policies regardless of who is driving the vessels and where they come from. We look to the Coast Guard to provide us with guidance on the ownership and documentation of the ownership of the vessels. We need to enforce the regulations relative to the harvest and provide for the conservation of the stocks regardless of who is on board.
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Chairman YOUNG. Doctor Evans, I just have one comment. You know, the Coast Guard's reputation has been thoroughly sullied in this whole operation. Have you requested documentation of who owns what in these vessels?
Dr. EVANS. Any time that a person applies for a permit to go fishing, we rely on the Coast Guard to provide us with documentation——
Chairman YOUNG. Have they done so?
Dr. EVANS. [continuing] for an endorsement.
Chairman YOUNG. Have they done so?
Dr. EVANS. Yes, they do.
Chairman YOUNG. Well, we'll get back to you later and see how recently this has occurred.
What's the total number of factory trawlers in the Bering Sea fisheries, and the total number in the North Pacific fisheries?
Dr. EVANS. I believe it's around 55. Let me check. I have Mr. Kent Lind from our North Pacific——
Chairman YOUNG. He'll write you in a little note there in a minute.
Dr. EVANS. OK.
Chairman YOUNG. How many of these factory trawlers meet or exceed the U.S. ownership requirement of 51 percent?
Dr. EVANS. I don't know the answer to that question, sir. I don't know the ownership characteristics of those trawlers. That's information——
Chairman YOUNG. Admiral, do you know the ownership characteristics?
Admiral NORTH. Of those in the Bering Sea?
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Chairman YOUNG. Yes.
Admiral NORTH. Not without knowing which specific vessels they are.
Chairman YOUNG. I would suggest, with all due respect, that you knew this hearing was coming forth. I would suggest that you find out.
Admiral NORTH. Sir?
Chairman YOUNG. Because that is the law.
—————
From the list of 35 vessels identified as Catcher Processors permitted to target North Pacific Pollock for 1997, provided to the Coast Guard by the National Marine Fisheries Service, 20 meet or exceed the U.S. ownership requirement of 51 percent.
Dr. Evans, how does NMPS view fishing permits and fishing licenses? Are they revokable? If so, does NMPS issue compensation? Are permits or licenses given forever? If not, how long are permits or licenses issued? And what's the difference between IFQ and other fishery permits?
Dr. EVANS. I'm sorry, sir. I didn't hear the very last part of your question.
Chairman YOUNG. Well, answer the first one. How do you view fishing permits and licenses?
Dr. EVANS. Fishing permits are basically permission to use the fisheries resource.
Chairman YOUNG. Are they revokable?
Dr. EVANS. Yes, they're revokable.
Chairman YOUNG. Do you issue compensation?
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Dr. EVANS. No, we do not.
Chairman YOUNG. They're not forever, are they?
Dr. EVANS. No, they're not.
Chairman YOUNG. How long are they usually issued? And how long are the permits or licenses usually issued?
Dr. EVANS. Well, they vary from fishery to fishery. There're some which are renewed annually; some which are issued for a period of 3 years. It varies.
Chairman YOUNG. What's the longest one?
Dr. EVANS. The longest.
Chairman YOUNG. I mean it's usually 1 to 3 years?
Dr. EVANS. Typically, yes.
Chairman YOUNG. OK. So in reality, if I was a boat owner, a vessel owner, and I caught 16 sea lions in my nets repeatedly, you could revoke by permit. Is that correct?
Dr. EVANS. Probably. I would imagine that——
Chairman YOUNG. If you didn't, I'm sure somebody would——
Dr. EVANS. [continuing] under the Marine Mammal Protection Act, where if the 16 sea lions were, you know, characterized as a problem, that's a possibility. Certainly, yes.
Chairman YOUNG. Very likely. Well, let's say I caught an abundance amount of bycatch beyond in anyone's acceptable amount. You could revoke it, couldn't you?
Dr. EVANS. I'm not sure that there are provisions to do that right now. We tend to use other measures to control bycatch.
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Chairman YOUNG. OK. Let's get back—how do you revoke a license, and what for?
Dr. EVANS. Typically, as a consequence of violations of regulations, licenses have been and——
Chairman YOUNG. That's what I just asked.
Dr. EVANS. [continuing] should be revoked. Yes.
Chairman YOUNG. What, I mean——
Dr. EVANS. Exceeding a quota, having——
Chairman YOUNG. I just asked——
Dr. EVANS. [continuing] prohibited species on board, for example. Yes.
Chairman YOUNG. Admiral, how many vessels currently involved in the U.S. fisheries are majority foreign? I asked that question, majority foreign owned?
Admiral NORTH. Sir, there's 29,000 some vessels in the fishery. There's no data base that shows the total number of foreign majority.
Chairman YOUNG. How many in the Bering Sea?
Admiral NORTH. I don't know how many in the Bering Sea are majority-owned. I don't know what vessels are——
Chairman YOUNG. Mr. Chairman, I'm going to suggest we have the Coast Guard before this Committee for a prolonged period of time for more questioning when they are better prepared.
Why did the Coast Guard follow a course of ownership standard which could have led to fully foreign-owned fishing fleet in the United States? And didn't the internal Coast Guard documents raise this issue, and indicate that it was counter to the congressional intent?
Admiral NORTH. The Coast Guard did what it did in interpreting the plain language of the statute.
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Chairman YOUNG. Now, Admiral, be careful here. Did not your legal branch warn you of this?
Admiral NORTH. There were a number of legal opinions within Coast Guard that were expressed, and the discussion or the——
Chairman YOUNG. You chose to disregard them?
Admiral NORTH. Those were not disregarded; those were considered by the Chief Counsel. The Chief Counsel's final conclusion was that the grandfather ran with the vessel.
Chairman YOUNG. OK. That's why we're having a GAO investigation, isn't it?
Admiral NORTH. Yes sir. That's right.
Chairman YOUNG. That wasn't on your watch, was it?
Admiral NORTH. It was not.
Chairman YOUNG. That's good. Well, then, thank God for that.
[Laughter.]
Because, you know, I have been a big support of your agency, and I am thoroughly, thoroughly disappointed.
Admiral NORTH. Yes sir.
Chairman YOUNG. I think that someone ought to take the time to do a little more research, and I'm not going to particularly beat up any individuals. But this is not the intent. Like I say, I was the only one sitting on this Committee. We knew what our intent was. I'm probably remiss in not finding out what was occurring. But to have the Coast Guard, especially, Mr. Chairman, when I have about a hundred requests a year on documentation for Canadian-made vessel or vessel made in Hong Kong or something. And the Coast Guard says, ''Oh, we can't document it.'' And yet, I look at this vessel over here. Now if you can tell there is some justification for that. I mean that is a disgrace to have that—in fact, I want to find out where that remaining piece of metal is on that ship. Maybe it's in the captain's quarters; it's the only place I can figure out it would be. I wonder how they can identify; maybe it has a DNA.
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[Laughter.]
Thank you, Mr. Chairman.
Mr. SAXTON. We have three members with us who are members of the Full Committee but not members of this Committee. And, Mr. Pombo, if you would like to take your 5 minutes at this point.
Mr. POMBO. Thank you, Mr. Chairman.
Admiral, I just have a few questions. Is it standard practice for the rights and privileges relating to vessels to run with the vessel