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BACKGROUNDER
Overview of Renewed Fish Processing Policy Framework
Overall Objectives
The overall objectives guiding the Government of Newfoundland and
Labrador�s new policy framework are: to establish the conditions
needed for a stable and competitive processing sector that requires
minimal public support; to promote employment that provides adequate
incomes; to promote industry cooperation that enhances product
quality and optimizes total returns from fish processing; and, to
seek balance between regional resource availability and regional
processing capacity, so that viable fish processing operations
contribute to rural economies.
Consultations
Newfoundland and Labrador�s fishing industry has changed from
groundfish-based to shellfish-based. A number of reports have been
commissioned in recent years to identify possible solutions to
challenges facing the Newfoundland and Labrador fishing industry.
Consultations have consistently found no industry consensus on how
to address matters such as overcapacity. These include the
Report of
the Special Panel on Corporate Concentration in the Newfoundland and
Labrador Fishing Industry (2001); the Structural Study of Inshore
Shrimp Fishing (2002); and the
Report of the Review of the Fishing
Industry Collective Bargaining Act (2003).
In June 2003, the then-Fisheries and Aquaculture Minister
established a commission to report on all areas of the fishery under
provincial jurisdiction. The commissioner, Eric Dunne, held over 50
meetings with industry members from almost 100 communities. The
Final Report of the Fish Processing Policy Review was endorsed as
the basis for a renewed policy framework by Minister Trevor Taylor
on February 4, 2004.
Issues with Fish Processing Licensing Policies
Since 1975, the provincial government has required that fish
processing plants must obtain an operating licence. These licences
specify the main species that can be processed in fish plants. As
early as 1981, the provincial government stopped issuing additional
processing licences because there was too much capacity. The
groundfish moratorium has further contributed to excess processing
capacity.
The province�s 1997 processing policy framework assumed that
groundfish stocks would soon recover and, despite stock declines, to
this day pressures continue for the issuance of new fish processing
licences. In 1997 alone, there were 14 crab processing licences
issued and another six were issued in 2001; licences have sometimes
been issued without proper proposals.
Since 1997, the province has classified processing licences as core
(everything but crab and 4R shrimp) and non-core (species-specific).
A recommendation that no additional crab licences be issued until
groundfish began to recover was not implemented. The growth of the
crab and shrimp industries was not anticipated. By 2003, there were
81 inactive licenses, of which 36 had been inactive since 1997. A
further 53 were cancelled. Inactive licences have existed in limbo,
but could be reactivated with a business plan approved by the
minister.
Prior to the establishment of the Fish Processing Licensing Board,
the licensing procedure that was supposed to be followed was: (1)
applicant submits a request and business plan; (2) the request is
recorded and a letter of acknowledgment is sent; (3) the government
reviews and assesses the proposal; (4) a licensing committee reviews
the proposal and makes a recommendation to the minister; and (5) the
minister makes a licensing decision. However, as pointed out in the
Dunne Report (p.84), ministers exercised their discretion between
1996 and 2002 to the point that there is "some doubt whether any
established process" was followed.
The Dunne Report clearly found the status quo of licence
decision-making to be unacceptable: "The manner in which licensing
decisions have been made over the last decade is the source of much
concern and consternation for industry members. Except for licence
transfers since 1997, there has been little, if any public
indication of other licensing decisions until they were handed down.
And then the industry did not necessarily know, or were ever
officially informed, of the reasons for the decisions. The general
lack of knowledge within the industry of the current and past policy
basis for licensing actions borders on the unbelievable." (p.113)
There is strong public demand for the province making the licensing
decision-making process more open, transparent, and accountable. The
Dunne Report makes a number of references to this public demand:
"The single most common observation from all meetings during this
review was that an arms-length body must make fish processing
licensing decisions" (p.113) and "Changing the manner in which
licensing decisions are made was the one issue on which there was
virtually unanimous agreement in all the commission�s consultations.
The view held by all participants in the fishery was that an
independent board must be established to administer licensing
decisions in a public and transparent manner. This is viewed as the
only way to eliminate unexpected, unexplained and simply poor
decisions. Almost everyone pointed to the splurge of crab and shrimp
licences and the resulting chaos as ample proof of the need for such
an arrangement." (p.145)
Fish Processing Licensing Board
A licensing board has been established to handle fish processing
licensing applications (e.g., for new licences, changes of
ownership, licence transfers, corporate acquisitions). These licence
decisions will no longer be made behind closed doors, without the
benefit of public scrutiny and a suitable business proposal. The
licensing board will increase transparency, ensure solid analysis of
viability, and remove politics from licensing decisions. The
recommendations of the board will be based on policy guidelines and
criteria given to board in a public manner by the Minister of
Fisheries and Aquaculture. Administrative support for the board will
be provided by the Board Secretariat, housed within the Department
of Fisheries and Aquaculture.
It is anticipated that there will be six to 10 meetings per year.
Meetings will be held as required at the discretion of the board. As
specified in the
Fish Processing Licensing Board Act, there are to
be no less than six meetings in a calendar year.
Provisions will be made for public representations to be made to the
board. Applicants must place an advertisement in a regional
newspaper as well as in a newspaper with province-wide circulation
indicating his or her intention to apply for a fish processing
licence. The advertisement will indicate that any interested party
may direct comments to the secretariat of the board. The board will
have the option to hold open, public meetings for applications with
respect to new licences or the transfer of a licence from one area
to another.
Proponents must demonstrate in their licensing application the
viability of the proposed venture and provide detailed information
on the following: the sources of raw material, a description of the
physical plant, a production plan, a marketing plan, key staff
needed, employment, and financial capabilities. Applications for new
licences and licence transfers should meet the following criteria:
proximity to resources to be processed; an adequate area labour
pool; existing processing facilities; existing harbour facilities
for landing, offloading and tie-up requirements; existing industrial
infrastructures; and acceptable levels of social, educational,
health, telecommunications and commercial services.
The board must review the level of concentration of ownership as it
considers requests for changes of operator, licence transfers, and
the issuance of new licences. The intent of this policy is to ensure
that any one company does not acquire a position within the industry
that could result in it having an undue influence in day-to-day
dealings with harvesters or other processors.
These criteria are described in detail in Section 3.0 of the Fish
Processing Licensing Policy Manual, available online at
www.gov.nl.ca/fishaq/processing or by contacting the department at
(709) 729-3736.
Species Licensing System
A species licensing system replaces the province�s outdated "core"
and "non-core" fish plant licensing system. This new system will
result in the retirement of all inactive licences and the removal of
inactive species and species groups from active licences. Initial
species licences will be issued on the following basis:
- Primary processing
establishments will only be authorized to process a species or
species group based on a minimum of one tonne finished weight
production for that species or species group in at least one of
2001, 2002 or 2003.
- In-province retail processors
will be issued a species or species group based on any level of
production for that species or species group in at least one of
2001, 2002 and 2003.
- Fish buyers will only be
authorized to purchase individual species from harvesters based
on any level of purchases for those species in at least one of
2001, 2002 and 2003.
- Secondary processing licences
will be issued based on the status quo with no minimum
production levels for species.
- Aquaculture processing licences
will be issued based on the status quo with no minimum
production levels for species.
Production or purchases for 2004 do
not qualify in establishing initial species designations. This was
clearly stated in the minister�s speech when the Dunne report was
publicly released on February 4, 2004. This was done to prevent
processors from scrambling to qualify for certain species and
creating chaos and disruptions in the industry during the 2004
season. A species licensing system will eliminate a number of
licences for various species in 2005 and remove some of the latent
capacity that existed in the industry. This should help improve the
financial viability of the entire fishing industry. Communities will
still be able to re-enter the fish processing sector in the future
based on meeting the conditions of the new policy framework. A
transitional policy will apply for the few licences that were newly
issued or changed operators in 2003 or 2004. In 2005, licence
holders can appeal their initial species designations to the
licensing board which will assess the appeal and make a
recommendation to the minister.
Resource Thresholds
Resource thresholds have been established for a number of key
species and species groups to guide when new licences should be
issued. New licences for other species and species groups will be
based on resource availability which will have to be demonstrated by
applicants in submission of their licensing applications and
business plans. The resource threshold approach is meant to provide
a balance between the available resource and the ability of plants
to process fish harvested. The industry will have to reach a minimum
average level of production per licence before further new licences
are issued. The thresholds proposed will be periodically reviewed by
the provincial government to ensure that the established thresholds
continue to meet government policy objectives. Establishing resource
thresholds will mean that new operations are more likely to be
viable because they will only be licensed if enough resource �
enough fish � is available.
Licensing Criteria
Licensing criteria have been set and will be used by the licensing
board for evaluating applications for new licences, licence
transfers or changes of operator. The primary criteria include
resource availability, a viable business plan, regional balance,
resource thresholds, corporate concentration, proximity
considerations (that is, proximity to resources, to labour and to
services) and existing facility considerations (that is, the
presence of processing facilities, harbour facilities and industrial
infrastructure). Other criteria and direction may be given to the
board by the minister from time to time, but will be done so in a
public manner. The new licensing criteria will help establish
optimal processing capacity and help strengthen the industry, in
conjunction with other measures.
Accountability Processes
Accountability processes have been established. All processors will
have to submit a processing plan (outlining intended operations by
species, market designations, and so on) to the Government of
Newfoundland and Labrador. In addition, processors must submit an
Annual Report on the previous year�s activity. This report will be
compared against the processor�s processing plan. A company seeking
a licence must disclose its shareholders as part of the
documentation process. The requirement to submit operating plans,
annual reports, and shareholder structures as part of the licensing
process will increase the accountability of processing plants. It
will also allow the provincial government to identify emerging
trends in concentration of ownership.
Quality Assurance
The Dunne Report made several recommendations on the Quality
Assurance Program of the Government of Newfoundland and Labrador.
Key components included: introducing in-season monitoring of
developments in processing and marketing activities; expanding and
updating species quality standards at all stages of raw material
handling; expanding surveillance operations through wider
geographical coverage and longer hours of operation; reviewing
assessment practices and enforcement measures; reactivating the
industry quality working group with clear direction and scheduled
meetings; reviewing and revising current standards to address the
specific characteristics and quality requirements of seafood; and
providing additional training for industry participants and
inspectors.
The Government of Newfoundland and Labrador is working on the
implementation of many of these recommendations. The industry
working group will be activated in the near future. This group will
review quality standards, training for industry participants, as
well as other quality-related activities. The government has hired
an additional 10 inspectors who will be deployed in April. Training
of inspection staff is ongoing and will continue.
Enforcement and Compliance
The Dunne Report recommended that enforcement and compliance be
separated from the policy-making arm of the Department of Fisheries
and Aquaculture. Therefore, a new Enforcement and Compliance
Division is being established. This division will include a
director, (to be hired in early 2005), audit staff, and case
management staff. The division is expected to be fully operational
by June 2005.
Legislative and Regulatory Amendments
Two Dunne Report-related bills were passed in the fall 2004 sitting
of the House of Assembly. The
Fish Processing Licensing Board Act
authorized the establishment of the Fish Processing Licensing Board
and provides for the structure and operations of the board. The
second piece of legislation passed was amendments to
The Fish
Inspection Act.
The Dunne Report recommended that the Government of Newfoundland and
Labrador carry out a review of the Fish Inspection Act and related
regulations. In addition to necessary amendments to address the
recommendations of the report, the government addressed a number of
deficiencies in the act. The principal changes to the act fell under
four general categories: scope, regulations, accountability, and
enforcement.
Most revisions under the scope included amending definitions and
adding new ones as needed. Other amendments include those to address
fish buying activities, grading activities, and agency agreements.
The old act required that all regulations be made by the
Lieutenant-Governor in Council. The revised act established two
types of regulations: those made by the Lieutenant-Governor in
Council and those made by the Minister of Fisheries and Aquaculture.
The revised act enhances the accountability of industry participants
through processing plans and annual reports. It also provides for
administrative penalties, ticketing, and for an increase in fines
for more serious offences.
The government is currently reviewing the Fish Inspections
Regulations and anticipates amendments in early 2005.
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