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March 31, 1997
(Fisheries and Aquaculture)

 

New policy framework aims for more viable, stable fish processing sector

Fisheries and Aquaculture Minister John Efford today released the province's new policy framework for the fish processing sector, one that will lead to a more stable, viable and competitive industry.

"Establishing a clear, transparent policy framework is a major step in reshaping the fishing industry, especially in terms of providing the opportunity for the private sector to make sound investment decisions and to generate more stable employment and higher average annual incomes for those dependent on the fishery for their livelihoods," he said.

The new framework "will lead to the emergence of a more viable and competitive industry," the minister said.

Key elements of the new policy include the development of the processing sector around core/multi-species plants, a provision for the transfer of processing licences between and within designated regions, special consideration for Labrador, the development of quality assurance measures in consultation with industry, and continued restrictions on the export of unprocessed fish. There are also new measures affecting the processing of snow crab in 1997.

"Measures such as the designation of core/multi-species plants and the transfer of processing licences will have a positive impact on the future performance of the industry, as well as on capacity consolidation and realignment," Mr. Efford said.

He said that these measures and others are based, with modification in some areas, on the final report of the Fishing Industry Renewal Board (FIRB), a federal-provincial body whose original mandate to make recommendations concerning harvesting sector capacity was expanded to include capacity in the processing sector. The board's final report was presented to government in November 1996, and formed the basis for the minister's regional public consultations with industry and community groups in January 1997.

Mr. Efford said any modifications government has made to the 19 FIRB recommendations reflect, in large measure, views given during the public consultation process by industry organizations and more than 300 individuals who attended regional meetings.

Commenting in more detail on specific components of the new policy framework, he outlined several key elements:


DESIGNATION OF CORE/MULTI-SPECIES PLANTS

  • Core plants will be designated on the basis of their historical attachment to groundfish processing. To be eligible for core status, a plant must have had an average annual production of 1,000 tonnes of groundfish for the 1987-91 period. Using this criterion, about 65 plants would be eligible for core status. Plants designated as core will be licensed to process all species, with the only short-term exceptions being snow crab and 4R shrimp.

    Plants not granted core status can continue to operate with their existing complement of licences, or expand their licence complement through a licence transfer process. These plants can also become eligible to meet core status through consolidation (transfer of licences that when combined would meet the 1,000-tonne production threshold for groundfish).

Mr. Efford said that the initial identification of about 65 core/multi-species plants "will, over time, lead to a more viable and dynamic industry. This approach will provide the opportunity for greater employment stability over longer employment periods, concurrent with resource recovery and the development of emerging species fisheries." Designated core plants will "anchor" regional processing activity, he said.


TRANSFER OF PROCESSING LICENCES

  • Provision is made for the transfer of processing licences within and between specified regions. Fisheries management zones 2J, 3K, 3L, 3Ps and 4R(3PN) will be the basis for regional balance consideration in assessing licence transfer requests.

    An underlying principle of licence transfer is that the policy will not result in the concentration of capacity in any given region of the province. Government (not an arms-length entity as recommended in the FIRB report) will make final decisions of licence transfer proposals. These will be considered on a case-by-case basis through a transparent process that will provide for public notice of all applications for transfers.

The minister noted that during the consultation process concerns were expressed over a regional concentration of capacity if a licence transfer policy were to be adopted. "Nevertheless, the consultations have shown that, provided adequate safeguards are implemented to maintain a regional distribution of capacity, these concerns can be alleviated," he said.


FISH BUYERS AND RETAIL LICENCES

  • Government has modified the FIRB recommendations that all fish buyers' licences and retail licences be eliminated. In the case of fish buyers, government has decided that all existing licences will be "grandfathered", that no new licences will be granted, and that those "grandfathered" will not be granted authority to add any additional species to their existing licences. Holders of the 15 existing retail licences for in-province trade will continue to be licensed by the Department of Fisheries and Aquaculture and can continue to source raw material from fish harvesters. However, any new over-the-counter retail licence holders must source their raw material from existing licensed buyers or processors. Any new retail licences will be regulated by the Department of Health from a health and safety perspective.


SECONDARY PROCESSING LICENCES

  • As in the past, secondary processing licences will continue to be issued. Unlike the past, licence holders are now permitted to purchase raw material, except snow crab and 4R shrimp, directly from fish harvesters, subject to the approval of specific proposals by the Department of Fisheries and Aquaculture. The new policy will contain a clearer definition of "secondary processing", and plants licensed only for secondary processing will not be permitted to engage in the sale of primary processed products.


REMOVAL OF PROCESSING TECHNOLOGY CONTROLS

  • The Fishing Industry Renewal Board recommended that government not regulate individual plant capacity on the basis of specific technology such as plate freezing, blast freezing, tunnel freezing and brine freezing systems. It concluded that the private sector needs the flexibility to respond to changing market conditions and technological innovation.

    The removal of such control measures is consistent with government's deregulation objectives. However, those non-core plants not currently licensed for freezing will not be given freezing authorization. "To do otherwise," Mr. Efford said, "would be inconsistent with the objective of reducing the number of plants in the industry and would compromise capacity consolidation initiatives."

    Non-core plants without freezing can, through the transfer policy, however, combine capacity with plants having freezing licences.


RESTRICTIONS ON THE EXPORT OF UNPROCESSED FISH

  • Government is maintaining its prohibition on the export of fish that has not received some measure of processing within licensed registered processing plants. Government recognizes that more benefits can be derived from certain species through product diversification and value-added processing. This view is reflected not only in its restrictions on the export of unprocessed fish, but in its policy for secondary processing and in new measures for the 1997 snow crab fishery.


QUALITY ASSURANCE

  • There is widespread support for the FIRB recommendation that a quality assurance program be implemented in consultation with industry, as an integral part of a new licensing policy framework.

    Quality assurance measures will be adopted in consultation with industry, will cover all species, and will be applied on a consistent basis industry-wide. A requirement for trained quality assurance personnel will also be considered as a condition of processing licences.

    There will be a critical role for the province, under the Fish Inspection Act, in enforcing quality measures, from dockside to processing plants. The Department of Fisheries and Aquaculture has provided special training to its employees who will be directly involved in quality assurance, particularly in the area of quality enforcement.


POLICY APPLICATION TO LABRADOR

  • Government accepts both of the FIRB recommendations relative to the application of a new licensing policy framework for Labrador. They are: (1) maintain the current policy of requiring that fish landed in Labrador be processed in Labrador; (2) benefits from emerging fisheries or expansion of existing fisheries in zones contiguous to Labrador be primarily for Labrador.

Mr. Efford said that the province will continue, through its licensing policy and fisheries development program, to fully support policy measures "that will enable coastal Labrador to derive increased benefits from both developed and emerging fisheries." Noting that his department is actively promoting the development of underutilised fish resources in the region, he mentioned as well his recent announcement that the middle-distance vessel Nain Banker will be leased to the Torngat Fish Producers Co-operative to enhance productivity and employment at its Makkovik plant.

"These are the kinds of measures that will bring about greater stability within the fisheries sector in coastal Labrador. Moreover, the special circumstances associated with the coastal Labrador fishery, especially north of Cape Charles, and the geography of the region necessitate a more flexible licensing policy than that for other regions of the province," he said.


NEW LICENSING FEE STRUCTURE

  • A new fee structure for processing licences, based around the core/non-core plant designations, will be introduced by mid-1997 following further consultation with industry. FIRB recommended that a system of cost recovery fees be implemented based on revenue generation either through volume or value of production.

"It is government's view that those enjoying the benefits of a restricted entry industry such as the fishery should make a reasonable contribution, by way of processing licence access fees, to the revenues of the province. From this perspective, higher value licences and species should make a greater contribution than lesser value licences and species under a new licence fee framework," Mr. Efford said.


SNOW CRAB PROCESSING

  • On the basis of a thorough review of four options presented by the FIRB, extensive discussions with industry stakeholders, and the likelihood of an increase in the snow crab quota this year, government is taking two measures that will affect the 1997 snow crab fishery.

    First, the export of crab sections for further processing outside the province will be limited in 1997 to 2,500 tonnes, an approximate 65 per cent reduction from the 6,800 tonnes exported for reprocessing in 1996. Limits will be applied to individual plants with a production history in this product form. During public consultations, considerable concern was raised over the volume of crab sections exported for processing elsewhere. Upgrading of crab sections in this province into other product forms, including graded and cleaned sections, will result in greater employment opportunities here. The export of industrial sections will be prohibited in 1998.

    Second, proposals will be invited from core plants for additional crab licences. These proposals will be evaluated in the context of overall processing policy objectives such as employment and product value maximization, and their contribution of multi-species plant operations. Subject to a thorough analysis of these proposals, government will issue a minimum of five new processing licences in 1997, allowing raw material to be sourced directly from fish harvesters. Currently there are 22 plants licensed for snow crab production.

"These measures represent a prudent approach to the management of the crab processing sector, and strike a balance between a continued freeze on additional licences and other options suggested by the FIRB," Mr. Efford said, noting that "as the groundfishery recovers, there will be further opportunities to consider approving additional licences to process snow crab."

While the FIRB did not make a specific recommendation on the issue of snow crab licences, it presented several options: (1) granting licences to all core plants immediately; (2) assigning a percentage of the total quota to core plants; (3) granting licences to strategic plants; (4) granting licences to a consortia of plants; and (5) retaining the status quo and not issuing additional licences until groundfisheries re-open to some consistent and acceptable level.

In conclusion, Mr. Efford said government is confident that the new licensing framework for fish processing, based around clear public policy objectives, "will meet the needs of the fishing industry over the foreseeable future. The policy will give industry greater flexibility to effect capacity realignment and capacity consolidation in response to changing resource and market opportunities."

Contact: Josephine Cheeseman, Director of Communications, (709) 729-3733.



________________________________________
BACKGROUNDERS

PROCESSING LICENSING POLICY:
HISTORICAL CONTEXT

Canada extended its fisheries jurisdiction offshore to 200 miles 20 years ago, in 1977. It was a consequence of this action, and the subsequent promise for resource growth, that processing capacity increased dramatically in the late seventies and early eighties. This growth in the processing sector led to the introduction of a restricted entry licensing policy in the early 1980s, a policy which has continued since that time. In 1975, two years prior to extended jurisdiction, the province had 89 plants which operated under a general, multi-species licence. Today there are 212 facilities licensed to process fish in primary form under a variety of restrictions such as limited entry to certain species, and controls on capacity.

Fish processing capacity has been a concern of the industry since the mid to late 1980s when it became apparent that the groundfish resource was not growing as projected, and in fact declined dramatically, culminating in a moratorium in the northern cod fishery in 1992, and on other groundfish stocks the following year. Processing licensing policy has been under continual review since 1992 in efforts to respond to industry's request for rationalization while, at the same time, recognizing the dependence of rural communities on the processing sector for related employment opportunities.

A wide range of options for policy changes has been considered in the intervening period, covering the spectrum from complete deregulation to even more government intervention. One of the first options considered, that of a government buy-out of capacity, was rejected by government at the outset. Government has also maintained consistently that it would not engage in a process which picked winners and losers, preferring instead to facilitate a means for the strongest and most innovative companies to restructure their operations to meet the challenges of the future.

In early 1996, the Fishing Industry Renewal Board submitted its initial report to government on a new policy framework that would help the processing sector become more viable, taking into account other objectives such as regional balance between processing activity and resource availability. This report recommended an approach based on individual transferable plant production quotas. This recommendation was tested on a pilot basis in the 1996 capelin fishery, but it did not receive widespread support. Consequently, government directed the board to consider other options.

The final report of the board was publicly released in January 1997, following which the minister held an extensive, province-wide series of consultation meetings in order to provide individual companies and community interest groups the opportunity to express their views on the board's recommendations.

The decisions announced today take into account the views heard during these consultations. These new policy measures, while maintaining a limited entry licensing environment, will nevertheless provide much greater flexibility for the private sector to respond to development opportunities without the need for prior approvals. This new policy framework will also facilitate consolidation of operations, thereby enhancing the efficiency and competitive position of the industry overall.

Some principal differences in the new and former policies are as follows:

  • All plants which meet the criteria for core status will be authorized to process all species other than snow crab and 4R shrimp, for which restrictions will be maintained. This is a significant departure from the former species-by-species.
  • Controls on processing technology will be eliminated for those plants which achieve core status, and for those which already have freezing facilities. This compares with the existing requirement that expansions be authorized.
  • License transfers will again be considered, having been frozen since 1992. However, any licenses transferred from a plant will result in closure of the plant. This is unlike transfers made prior to 1992, whereby individual species could be transferred and the plant remained operational on other species.
  • There will be increased emphasis on quality assurance. A requirement that plants will be required to employ trained quality personnel as a condition of holding a licence will be considered. In addition, the province will be enforcing quality measures from dockside to processing plants to complement the Federal Quality Management Programs administered for individual plants.
  • There is greater flexibility for secondary processing. New secondary processing operations will be authorized, subject to a departmental review of all proposals, to buy raw material directly from fish harvesters. While the former policy provided flexibility for new secondary plants, they were required to source their raw material from other buyers or processors.
  • The Department of Health will regulate new retail operations. Retail processing establishments are those which process fish on condition that the product is sold only to the local markets. Current licence holders are licensed by the Department of Fisheries and Aquaculture, and are permitted to buy fish directly from fishermen. Existing licence holders will retain their licences through a grandfathering provision of the new policy. Any new, over-the-counter retail establishments will be regulated by the Department of Health from a health and safety perspective, but they will be required to source their raw material from existing buyers or processors.
  • Fees for processing licences were eliminated in 1993, at which time they were of nominal amounts. A new fee schedule will be introduced to reflect the new policy framework and will be based on industry access, not cost recovery. New licence fee principles will be discussed with industry prior to fees being implemented by mid-1997.


CORE/NON-CORE LICENCE PRINCIPLES

Core Plants

  • Individual plants will be designated as having core/non-core status based on their historical activity in processing groundfish. The period to be considered in assessing processing activity is the five-year period, 1987-1991. During this period the average annual production of all species of groundfish, converted to equivalent round weight, must be at least 1,000 metric tonnes. Departmental records (subject to verification) show that 65 plants with groundfish licences will meet this criteria.
  • Plants receiving core designation will be given the opportunity to acquire additional species licences for their future operations. All plants meeting core status will be authorized to process all developed species other than snow crab and 4R shrimp. Access to snow crab will continue to be restricted until the groundfish fishery reopens to an acceptable level, to ensure that employment levels in existing crab plants are not jeopardized. The restriction on access to 4R shrimp will be maintained in consideration of the limited resource currently available for the two shrimp plants that were established specifically for that fishery. Any change will be considered only in the context of other opportunities for shrimp.
  • Government reserves the option, in the case of emerging species, to evaluate proposals for specific species on a case-by-case basis.
  • All restrictions on processing technology presently associated with the licences for core plants will be removed.

Non-Core Plants

  • Primary processing plants which do not meet the 1,000 tonnes threshold for core status will be designated as non-core plants.
  • Non-core plants will continue to operate with all the authorizations they have received to date. However, they will not be eligible for any additional species licences, or for any additional authorizations to install freezing capability except as provided in the licence transfer policy.
  • Non-core plants will be permitted to consolidate their operations through licence transfers to meet core status.
  • Companies which have more than one plant may be provided an opportunity to combine the production levels of two or more of their non-core plants in order to obtain core status for either of the plants they wish to designate. The remaining plant (or plants) involved in this election will close.
  • Companies will be given the opportunity to request a review of individual plant designations.

LICENSING POLICY PRINCIPLES

  • The key objectives of the new licensing policy are:
    • to promote industry stability, competitiveness and viability;
    • to facilitate a regional balance between resource availability and industry capacity on a regional basis;
    • to enhance the maximum operating period possible for processing plants;
    • to enhance the quality of fish products and to maximize the economic benefits associated with their production.
  • Policy based on plants being categorized by two broad categories, core and non-core.
  • All designated core plants will be eligible for multi-species licences with the exceptions of crab and 4R shrimp.
  • Non-core plants will be permitted to retain their present complement of licences and can meet core status through capacity consolidation.
  • The new policy will incorporate the opportunity for licence transfers subject to regional balance considerations.
  • No new fish buyers/retail licences to be issued by the Department of Fisheries and Aquaculture; existing licenses to be "grandfathered". Requests for new over the counter retail licences to be approved by the Department of Health with sourcing of raw material only from existing buyers/processors.
  • Secondary processing licenses will not be restricted. Raw material except snow crab and 4R shrimp, can be sourced from fish harvesters, subject to a review of proposals by the Department of Fisheries and Aquaculture. Such plants will not be authorized to engage in the sale of primary processed products.
  • Processing technology and controls to be removed for primary and integrated primary/secondary processing plants having freezing authorization.
  • No new primary processing plants to be licensed. Applications for processing licences from aquaculture operators to process raw material sourced solely from aquaculture sites will be reviewed on a case-by-case basis.
  • Restrictions will continue on the export of unprocessed fish.
  • Increased integration of quality assurance measures into the new licensing framework.
  • Flexibility for Coastal Labrador.
  • A new licence fee structure to be implemented by mid-1997 based around industry access to raw material, not cost recovery.
  • Transparent consultation/review process with the public and industry stakeholders.

PROCESSING LICENCE TRANSFER PRINCIPLES*

  • The licence transfer policy is designed to facilitate the attainment of public policy objectives for the processor sector as follows:
    • to promote industry stability, competitiveness and viability;
    • to facilitate a regional balance between resource availability and industry capacity on a regional basis;
    • to enhance the maximum operating period possible for processing plants;
    • to enhance the quality of fish products and to maximize the economic benefits associated with their production.
  • No automatic transfers. All licence transfer requests will be considered on a case-by-case basis in the context of (1).
  • Licence splits will not be permitted. Any approved transfer will result in the elimination of one or more licensed facilities.
  • Transfers may be approved to achieve core status by consolidating two or more non-core plants, with a requirement that at least one plant having been previously approved for primary freezing. This condition may be waived if three or more plants are being consolidated.
  • Licence transfers can be effected within fisheries management regions and between fisheries management regions.
  • Fisheries management zones 2J, 3K, 3L, 3Ps, and 4R (3PN) will be used in determining the regional balance between resource availability and processing activity.
  • All licence transfer requests will be advertised as part of a transparent process to accommodate industry/community views.
  • All licence transfer proposals will be examined by a departmental Licence Transfer Review Committee with government, not an arm's length agency, to take the final decision on all transfer proposals.
  • Requests from proponents for a review of transfer proposal decisions will be considered.
                         *    Criteria to be refined, where necessary,
                              in consultation with industry.




SNOW CRAB ELIGIBILITY CRITERIA

  • Licences will only be considered for those processing plants which are licensed and meet core status.
  • Applications will be considered from individual plants or from a consortia of core plants.
  • A comprehensive business plan must accompany all applications indicating product mix, access to raw material, proposed operating period, and employment generation.
  • Applications must demonstrate how access to crab processing will enhance the overall viability of the applicant's existing core, multi-species operation(s).
  • Preference to be given to those proposals based on the maximization of value-added activity in conjunction with (4).
  • The minister reserves the right to reject any and all proposals.
1997 03 31 2:35 p.m.

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