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
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.
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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.
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