The approach being implemented by the Government of Newfoundland and Labrador is designed to bring stability to the snow crab sector for the 2005-2006 seasons by the introduction of a two-year pilot project that will cap the level of production of each plant, based on a proportion of the available snow crab.

The key features of the system being implemented include:

• Two Year Trial with a formal review;

• In-season/temporary transfers only under extenuating circumstances;

• Monitoring and Penalty System;

• Transparent Price Setting Mechanism; and

• Shares Developed and Implemented through a process directed by Government.

This model is based on the Raw Material Sharing (RMS) system proposed by the Dunne Commission. To address many of the concerns raised by plant workers and harvesters, the model proposed does not allow permanent transfers, and in-season transfers will only be allowed under extraordinary circumstances such as fire or natural disaster.

The concept of allocating individual raw material or input shares to processing facilities is relatively new. It means processing licence holders would be authorized to acquire up to a specified amount of available raw material for processing. The Dunne Commission report had envisioned that the allocation or share would be a raw material purchasing entitlement, expressed as a percent of all available quotas of a given species, or of each separate quota of each species.

Raw material shares are not catch quotas or allocations of fish in the water; these are granted only to licensed harvesters by the federal, not the provincial, government. The provincial allocation is only a cap on the amount of fish that can be purchased for each plant. It can be interpreted as a share that would be reserved or protected for each processing facility to the exclusion of others. In essence, this system would limit races to acquire raw material that some feel are as detrimental to processing operations as competitive fisheries are to harvesters.

Fish harvesters will retain their ownership of the resource through their individual quotas granted by the Department of Fisheries and Oceans (DFO). Given this, any sharing system developed by the provincial government can only be a production or purchase maximum. The RMS is only a ceiling or cap on the amount of raw material that can be purchased from harvesters by a processor for a plant.

Harvesters in this province have been opposed to any model that could potentially limit competition for raw material and thereby lower prices. As well, there are concerns that processors would not continue to provide the financial and other customary services to harvesters. The model government proposes would include a mechanism for price setting that is open and transparent. This has been a critical failing of the past price setting mechanism. A pricing formula would used similar to that used for lumpfish. Processors will be required to open their sales receipts to an independent auditor, and this information will be used in a price-to-market formula. Furthermore, the system as outlined does not give control of fish quotas to processors, so harvesters can still expect to receive the same types of services as in the past.

The caps for each processing facility will be developed in consultation with an independent arbitrator. The arbitrator will hear arguments from each processor related to historical purchases, economic viability, long-term agreements with harvesters and regional balance considerations as directed by the minister.

Government will carefully monitor industry activity under this system and provide administrative guidelines for the operation of the system. Processors overrunning their cap will be penalized on a three-for-one basis the following year, plus a $3,000 per tonne penalty. Government will issue the shares as a condition of license and will require detailed and timely reporting.