The seafood processing sector is facing a number of challenges including seasonality and overcapacity. To address these challenges, the Province proposes to further strengthen the fish processing policies and the role of the Fish Processing Licensing Board. This will help reduce capacity and increase regional and corporate consolidation. Over the longer term, these measures should increase the industry�s viability and competitiveness by gradually reducing the number of licences and by reducing the amount of capacity.

In 2004, the Province announced and implemented a new processing policy with changes that included: establishing an arms-length fish processing licensing board as well as a formal industry-government policy advisory board; a focus on active processing licences; adoption of a species licensing system linked to resource thresholds; established criteria for new licences and licence transfers; and an annual requirement to report corporate shareholders in fish processing companies.

This new processing policy has begun to show results. In 2005, for example, the move to species licensing resulted in the removal of a significant number of species processing authorizations. This year, 2007, is the first year of the application of the Province�s two-year inactive licensing provisions and will result in the removal of over 80 species licence authorizations and the cancellation of certain plant licences.

The federal-provincial consultations undertaken as part of fishing industry renewal have clearly indicated to the Province that people who work in processing facilities are not prepared for large scale plant closures in the absence of social safety measures such as an early retirement program. Given this, the Province is developing a more rigid framework that addresses community concerns and provides an evolutionary approach while providing processors with an open and transparent policy framework.

The following description is not the official statement of policy, but represents the general intentions of the Province. The final statement of policy is subject to final technical and legal drafting and will be issued soon.

It is the Province�s intention to strengthen the processing policy framework to include more rigorous policies related to the issuance of new licences, a more restrictive transfer policy, tougher policy on cancellation of licences, and a clear policy on the limited circumstances under which the Province will consider responding when a plant closes.

The policy changes being considered would strengthen the existing policy and provide for adjustment in the industry over the medium to longer term. As demographic and other factors come into play, the number of plants will continue to decline and this policy will facilitate this adjustment. Plants that remain will be made stronger and the operating periods will be longer.

The current Fish Processing Licensing Board has provided an open and transparent licensing process. Under a new policy framework, the operations of the board will be strengthened and key changes will be implemented. It is anticipated that the board�s discretion will be reduced so that it would be restricted from recommending the issuance of new licences until the resource thresholds and the other criteria are met. The criteria for the board to consider new licences would include:

Individual species licence transfers must be publicly advertised. Under a more rigid policy framework, it is anticipated that transfers would not occur unless resource thresholds are met or the transfer results in the closing of a facility. Exceptions may be permitted where the transfer would substantially improve regional balance. A deficient region is one where the amount of fish processed is 75 per cent or less than the catch by resident fishers in the region. Species transfers within regions would not be allowed unless a plant closes as a result of the transfer or the resource thresholds for the province are met. The regions will be based primarily on NAFO areas and fish in adjacent waters. For species without resources thresholds, only regional balance will be a consideration.

Species licences are currently cancelled by the Department of Fisheries and Aquaculture after two years of inactivity. It is expected that the minimum production levels to maintain s will be increased and will take into account both the volume of production and the processing period. The amount will vary by species but will be substantially higher than current levels.

There is currently no specific policy to guide whether the Province should intervene when a plant closes. Under a new policy framework, policy guidelines would be established to ensure regional balance under such circumstances. The Province would have the option to intervene when a plant closes in an area that processes less than 75 per cent of the fish available to resident fishers in the region. If this occurs, the licence could be offered through a call for proposals. Licence transfers could be considered to improve regional balance. Some fine-tuning of this policy may be required as a result of discussions with industry prior to implementation. Consistent with past policy, the Province will not provide funding for primary processing activity.

Note: These policy amendments are subject to the Province�s normal policy review and regulatory due diligence.

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