Canada Gazette, Part I, Volume 153, Number 27: Regulations Amending Certain Regulations Made Under the Fisheries Act

July 6, 2019

Statutory authority
Fisheries Act

Sponsoring department
Department of Fisheries and Oceans

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Executive summary

Issues

Over the last 40 years, Fisheries and Oceans Canada (DFO) has developed a suite of policies that pertain to the inshore and coastal fisheries in Atlantic Canada and Quebec with the aim of promoting viable and profitable operations for the average fishing enterprise by keeping licences and their associated benefits in the hands of independent, small boat owner-operators. However, inshore harvesters, fleets, and industry associations have expressed concerns that a licence holder’s ability to make independent decisions in their own best interest is being compromised by the proliferation of agreements and arrangements between licence holders and third parties, such as fish processors and buyers. In these agreements or arrangements, third parties, who are ineligible to hold inshore licences themselves (as per DFO licensing policy), gain access to the fisheries resource and assert control over the fishing activities and/or the proceeds from those activities. This undermines the exercise of the Minister’s discretion to issue licences in a manner that achieves desired social, economic and cultural objectives.

Amendments to the Atlantic Fishery Regulations, 1985 and the Maritime Provinces Fishery Regulations are sought in order to protect the independence of commercial inshore and coastal licence holders by addressing two main issues:

• Ensuring that the Minister’s licensing decisions are not undermined; and
• Conformity challenges associated with the current policy regime.

Ensuring that the Minister’s licensing decisions are not undermined

In essence, these problematic agreements or arrangements result in the licence holder holding the title of the inshore licence in name only while another person or entity receives certain or all rights and privileges associated with that licence. In other words, the third party receives the benefits stemming from the licence.

When a person who is determined to be eligible to hold a licence is issued an inshore or coastal licence to fish, there is an expectation that the same individual is carrying out the activities authorized under the licence and benefits personally from the fishing activity. Although this has historically been a key objective behind the intent of the inshore policies, the Fisheries Act and its regulations do not currently require that a licence holder retain both the title to the fishing licence and the rights and privileges that flow from it, referred to in common law jurisdictions as the beneficial interest associated with a licence to fish. Although this type of separation of licence title from the rights and privileges of a licence would likely result in licence holders not meeting the requirements of DFO’s policy titled Preserving the Independence of the Inshore Fleet in Canada’s Atlantic Fisheries, otherwise known as PIIFCAF (which in essence renders licence holders who are party to an agreement through which a third party has control or influence over the licence holders’ decision to request the re-issuance of the licence non-eligible to hold an inshore licence), a regulated explicit prohibition would make such a practice a prosecutable offence under the Fisheries Act.

Without explicit regulatory prohibitions related to the use and control of the rights and privileges under a licence to fish, it will continue to be challenging for DFO to ensure that the Minister’s discretion to issue licences to meet social, economic and cultural objectives is not undermined by virtue of such agreements and arrangements.

Conformity challenges associated with the current policy regime

Based on feedback from stakeholders and information gathered through departmental administrative “compliance” assessments, it appears that ineligible third parties, in large part fish processors and buyers, continue to enter into agreements or arrangements that seek to assert control or influence over the inshore fishing sector and secure access to the fisheries resource. These agreements and arrangements intentionally attempt to exploit the flexibility available under DFO’s policy regime to circumvent the intention of the inshore policies, thus undermining their objective of independence of the licence holders.

Although DFO has assigned additional resources to an administrative review process in an effort to support licence holder adherence with the inshore policies, policies remain subject to interpretation, are not legally enforceable, and are subject to exceptions. There are concerns that the conformity challenges of the existing policy regime have resulted in, among other things, the loss for coastal communities of the benefits flowing from the fishing licences, inflated market price of fishing enterprises and barriers to entry in the fishery, as prospective new entrants cannot easily afford to become licence holders.

Without the appropriate tools at its disposal, DFO is unable to more fully meet both departmental objectives and calls from stakeholders to protect the inshore fishing sector in Atlantic Canada and Quebec.

Background

Importance of licensing for the proper management and control of fisheries

Fisheries are a public resource that belongs to all of the people of Canada. The Minister of Fisheries, Oceans and the Canadian Coast Guard has the mandate to conserve and protect the fisheries resource and to properly manage fisheries on behalf of all Canadians and in the public interest. In managing fisheries, the Minister may take into account social, economic or other grounds in order to carry out social, cultural, or economic goals and policies. A key tool at the Minister’s disposal to manage fisheries is the licensing system.

DFO has developed policies to guide the exercise of the Minister’s absolute discretion to issue licences pursuant to section 7 of the Fisheries Act. Among other things, these policies outline directions and restrictions designed to control fishing effort and to promote viable and profitable operations for the average fishing enterprises by distributing fishing opportunities and benefits across regions; controlling the concentration of licences; supporting the retention of employment opportunities in smaller coastal communities; and controlling the overall number of enterprises engaged in the limited entry inshore fishing sector.

Prior to the 1960s, fisheries on Canada’s East Coast were open to anyone who wished to fish, with no restrictions on who could hold a licence, no limitations on the number of licence holders in a fishery, and no significant restrictions on catch levels. In the late 1970s, concerns from inshore harvesters began to arise in response to the proliferation of fish processing plants that were acquiring vessels and registering them for the inshore fishery, which had the effect of increasing the overall concentration of inshore licences into corporate hands and forcing the individual independent licence holder out of the fishery. In response to these concerns, DFO developed policies intended to secure the flow of benefits from the resource to independent licence holders and to the local communities that drew significant cultural and economic value from the fisheries.

Present day commercial fisheries are largely “limited access” fisheries, which means that a licence is required in order to access the resource and a limited number of licences are issued for each fishery. Individuals or corporations who wish to obtain a licence must first meet the eligibility criteria set out by the Department’s licensing policies and complete the application process. Generally, licences are valid for one calendar year and licence holders can apply to have the licence issued to them again the following year. This process is automated thought the National Online Licensing System (NOLS). After the licence is issued, the licence holder must adhere to a variety of conditions associated with the licence or licences they hold. The licence conditions often include, but are not limited to, harvest limits or quotas, assigned fishing areas, gear limits, and/or vessel length restrictions.

Commercial fisheries on Canada’s East Coast are also organized by sector based on vessel length restrictions, ranging from no vessel / small vessel in the coastal sector to larger vessels (over a 100 ft. in length) in the offshore sector. Unique licensing policies and eligibility criteria apply to each sector.

The largest commercial fisheries sector in Atlantic Canada and Quebec is the inshore sector, representing the vast majority of licence holders. It is generally restricted to using vessels less than 19.8 m (65 ft.) in length and is primarily a sector of multi-licensed and multi-species independent enterprises that are headed by full-time fish harvesters. The inshore sector has historically been managed with an additional goal of supporting and maintaining fishery-dependent coastal communities in Eastern Canada. As most policies were established after the sector’s initial development in the 1960s, exceptions to certain policy elements were provided to individual licence holders or fleets as a way to minimize the impacts of these policies on the sector or on individual licence holders.

By way of licence issuance, the Minister is providing privileged access to the fisheries to certain persons under certain conditions. Licence conditions impose specific rules of conduct, in addition to those provided for in the Fisheries Act and its regulations, to which a licence holder is subject. These can include the size of fish that can be harvested and landing requirements. By law, a licence to fish is non-transferable. The licence holder is responsible to carry out the activities authorized under the licence.

Subsection 16(1) of the Fishery (General) Regulations establishes that fishing licences are the property of the Crown. By issuing licences to eligible fish harvesters under section 7 of the Fisheries Act, the Minister confers to the licence holder limited rights and privileges, including the ability to access the resource and the ability to recommend who the licence could be reissued to (commonly referred to as a “licence transfer,” and subject to the eligibility of the proposed licence holder). These limited rights and privileges are also accompanied by the obligation to abide by licence conditions, the Fisheries Act and its regulations. These rights and privileges are temporary and exist only for the term of the licence. They are non-transferable by the licence holder, except in some limited cases where DFO authorizes the licence holder to reassign certain rights. For example, DFO may authorize quotas or gear to be reassigned between licence holders, or the designation of a substitute-operator to carry out the activities authorized in the licence.

It has long been the intent of the inshore policies to require that a licence holder retain both the title to the fishing licence and the rights and privileges conferred under it, as well as to maintain a separation between licence holders accessing the resource and the processing sector.

Importance of the independence of inshore and coastal licence holders for the viability and prosperity of coastal communities in Atlantic Canada and Quebec

Fishing remains one of the main industries in rural coastal Eastern Canada generating about $1.7 billion in landed value (inshore fleets only) in 2017 and supporting many fisheries-dependent communities. Most fishing-related jobs are part of the middle class in Atlantic Canada and Quebec, where the fishing industry employs more than 59 000 fish harvesters and processing workers. ^{footnote 1} The Government of Canada wants this wealth to be kept in the hands of those individuals that actively fish and for the wealth accumulated to be reinvested and spent in coastal communities, rather than have it concentrated in the hands of a few, wealthy corporations in larger urban centres.

Progressive fisheries policies that prevent vertical integration between the fishing and processing sectors and that prevent the concentration of licences in the hands of a few corporations have been pivotal in the maintenance of the wealth distribution across the region and small communities. Without these policies, wealth from fishing licences would have concentrated in the hands of fish processors/buyers and/or other investors resulting in fewer or lower paying fishing jobs available in rural coastal areas and in a decrease of economic benefits being maintained in the coastal communities.

DFO’s suite of policies that pertain to the inshore and coastal fishery aim to ensure that licence holders remain independent and that the benefits derived from accessing the common property fisheries resources in the inshore fishery flow to licence holders and to their local communities.

Overview of the inshore policies

As stated above, the Department’s inshore policy suite includes four policies: the Fleet Separation policy, the Owner-Operator policy (both part of the Commercial fisheries licensing policy for Eastern Canada - 1996), the Preserving the Independence of the Inshore Fleet in Canada’s Atlantic Fisheries (PIIFCAF) policy and the Policy on the Issuance of Licences to Companies (ILC).

Fleet Separation policy

The Fleet Separation policy was introduced in 1979 for inshore fisheries and eventually to the coastal sector as well. At the time, it established that licences could only be issued in the name of an individual fish harvester. It was intended to promote locally owned, independent fishing enterprises and to support and grow fishery-dependent communities. It was also intended to prevent corporate concentration of inshore licences by aiming to ensure that inshore licences were not issued to corporations, in particular those involved in the processing sector, and to curtail any potential advantage given to fish processing corporations through the control over both the price and supply of catch.

Owner-Operator policy

The Owner-Operator policy was formally implemented across Atlantic Canada and Quebec in 1989 for inshore fisheries and eventually to the coastal sector as well. It established rules requiring the licence holder to be on board the vessel while a licence was being fished. The Owner-Operator policy limited the horizontal integration of the sector by requiring that a licence holder fish the licence issued to them personally (i.e. be on board the vessel authorized to fish) and limiting licence holders to holding only one licence per given species. The policy’s intention was to ensure that the individual who holds the licence is the one carrying out the activities authorized under the licence, and is the one who benefits from the fishing activity.

Preserving the Independence of the Inshore Fleet in Canada’s Atlantic Fisheries

During the 1990s, licences in the inshore sector began to become the subject of trust agreements between licence holders and third parties. In a fishery setting, these agreements conferred some or all of the rights and privileges held by the licence holder to a third party, essentially allowing that third party to exert control or influence over and benefit from the licence. In the inshore sector, these arrangements are believed to be between licence holders and other third parties that are not eligible under DFO licensing policies to be issued the licence, particularly fish processing companies and fish buyers.

Agreements such as these are believed to compromise the ability of licence holders to make independent decisions in their own best interest, as well as sidestep the Minister’s authority and absolute discretion to issue fishing licences. Some of these agreements place the effective control of fishing licences primarily with the third party, and they move most of the wealth generated from the fishery away from those who actually fish, thus weakening the link between the independent licence holder and the resource. In some situations, the licence holder simply becomes a name on the licence or an employee of the third party, leaving all decisions regarding the use or control of the licence to the third party.

In 2004, in response to the concerns raised about the increasing number of such agreements within the inshore fleet, DFO undertook public consultations on the Owner-Operator policy and the Fleet Separation policy and the agreements attempting to circumvent them. Consultations highlighted these concerns and licence holders urged DFO to prevent the proliferation of these agreements in order to keep the inshore licences in the hands of independent fish harvesters.

In 2007, DFO responded by introducing the policy for Preserving the Independence of the Inshore Fleet in Canada’s Atlantic Fisheries (PIIFCAF) which aims to strengthen the Owner-Operator policy and the Fleet Separation policy with the goal that inshore fish harvesters remain independent, and that the benefits associated to fishing licences flow to the licence holder and to coastal communities. Under the PIIFCAF, a new category of licence holder was created: Independent Core (IC). Licence holders who have IC status have signed a declaration, stating that they are not party to a “Controlling Agreement” or CA, which is defined in the PIIFCAF policy as an agreement between a licence holder and a person, corporation or other entity that permits anyone other than the licence holder to control or influence the licence holder’s decision to submit a request to DFO for re-issuance of the licence to another fish harvester.

Once the initial declaration was signed and the licence holder was classified as Independent Core, the licence holder was deemed eligible to hold an inshore licence and was required to maintain this status to remain eligible. Licence holders were given seven years, until April 12, 2014, to either terminate or amend declared pre-existing Controlling Agreements in order to bring them in line with the PIIFCAF policy. After April 2014, any existing agreements had to be PIIFCAF compliant in order for the licence holder to continue to be eligible to hold a licence to fish. In order to maintain their IC status, licence holders subject to this policy have to declare every year that they are still not party to a CA.

Since April 2007, DFO has tried to ensure that new and existing licence holders meet the requirements of PIIFCAF but there have been multiple challenges. One of the main challenges lies in the narrowness of the definition of a CA which is linked to the request for re-issuance of the licence (commonly referred to as a licence transfer). Agreements and arrangements with third parties have continued to evolve in ways that attempt to achieve compliance with the PIIFCAF policy while maintaining third-party control or influence over the licence and the activities that are authorized under it. This has made it more challenging to implement the PIIFCAF policy and achieve the objective of independence in the inshore sector.

Policy on the Issuance of Licences to Companies

Finally, the Policy on the Issuance of Licences to Companies (ILC) was introduced in 2011 to provide licence holders with tools and options to access tax benefits offered to corporations by allowing them to choose how to organize their businesses in the most fiscally advantageous manner. This policy allows a licence holder, upon request, to have the inshore fishing licences they hold be issued to a wholly owned company for which they control 100% of the shares.

Objective

Ensuring that all licence holders abide by the proposed amendments will help to maintain a level playing field in the fishery and reduce the risk that the current social, economic and cultural benefits associated with independently owned businesses are diverted away from licence holders to fish processors and buyers. DFO has been, and remains, committed to protect and preserve the independence of commercial inshore licence holders in Atlantic Canada and Quebec and to secure the flow of benefits from the resource to these independent licence holders and to the local communities that draw significant cultural and economic value from the fisheries.

By establishing licence eligibility criteria and clear rules of conduct subject to enforcement action under the Fisheries Act, these proposed amendments will go a long way to address practices that threaten to undermine licensing decisions made by the Minister. This will allow the Minister to continue to licence inshore and coastal fisheries in a manner that fulfills social, economic and cultural objectives, and to protect the independence and prosperity of small coastal communities.

Description

The regulatory amendments propose to maintain the current scope of application of the inshore policies. Therefore, the proposal would only apply to Atlantic Canada and Quebec, and to licence holders fishing under the authorities of commercial licences in the inshore and coastal sectors issued under the Atlantic Fishery Regulations, 1985 and the Maritime Provinces Fishery Regulations.

The proposed amendments would mirror current elements of the Owner-Operator policy and the Fleet Separation policy as well as the Issuance of Licences to Companies policy, where it applies. Regulations are proposed to require that (1) an inshore and coastal licence only be issued to an eligible individual, its estate or its wholly owned company; and (2) holders of inshore and coastal licences, operators named in these licences, or authorized substitute-operators, be required to personally fish the licence. These elements would apply to inshore and coastal licences currently subject to the Owner-Operator policy and the Fleet Separation policy.

The proposed amendments would also include: (1) a prohibition against the licence holder transferring the use or control of the rights and privileges conferred under a licence to a fish processor or buyer; (2) a prohibition against fish processor or buyer using or controlling the rights and privileges associated with a licence; and (3) an eligibility criteria that would restrict the issuance of licences only to those applicants (including current licence holders applying for renewal) that have not transferred the use and control of the rights and privileges to a fish processor or buyer. Both elements would apply to the inshore licences held by licence holders currently subject to the PIIFCAF policy.

The rights and privileges obtained through a licence to fish include, but are not limited to

• a right to engage in an exclusive fishery under the conditions imposed by the licence;
• a proprietary right to the fish caught under the licence and the decision-making over benefits resulting from their catch; and
• privileges granted through policy, such as the ability to make requests for substitute-operators, licence renewal, licence re-issuance or quota transfers.

The proposed amendments would define fish processors and buyers as the holder of a provincial licence to process or buy fish. If that holder is a corporation, the definition would also include any person that has an interest in that corporation. It would also include any corporation in which the holder of the processing or buying licence holds an interest in, and any person under the direct or indirect control of any of the previously mentioned persons. This broad definition is intended to mitigate possible circumvention of the intent of the proposed Regulations.

Under the proposed amendments, the licence holder would have to personally retain and exercise the rights and privileges conferred under the licence, and could not transfer them to a fish processor or buyer, unless such transfer was provided for under the Regulations.

Authorized circumstances

The purpose of the proposed amendments is to protect and preserve independence in the inshore fishery while not interfering with the potential for licence holders to obtain legitimate access to capital and have successful fishing enterprises. In order to maintain current practices, the proposed amendments would authorize the use and control of the rights and privileges to be transferred to a creditor exercising its right with respect to a security in the licence under provincial legislation, if the licence holder was in default of payment.

Retaining existing exceptions and exemptions

As outlined during consultations, all exceptions that currently exist under the policies would be maintained under the proposed amendments. They include, among others, licence holders that were authorized to designate an operator to fish the licence issued to them, and corporations that held inshore licences prior to the establishment of the Owner-Operator policy in DFO’s Maritimes Region (known as the pre-1989 companies).

The regulatory proposal would also not apply to the corporations, fleets, and individuals who have historically been exempted and/or excepted from the application of some or all of the inshore policies. They include, among others, corporations that held inshore licences prior to the establishment of the Fleet Separation policy (known as the pre-1979 companies); exempted fleets established under the PIIFCAF policy; and organizations that receive allocations in the inshore fisheries.

Categorization of licences

In order to manage the existing exceptions, the proposed amendments would codify the current application of the policies to inshore and coastal licences issued under the Atlantic Fishery Regulations, 1985 (AFR) and the Maritime Provinces Fishery Regulations (MPFR) by creating categories of licences based on regional, fleet-specific, or situational needs and accommodations. The categories would then be used to describe which of the proposed regulatory elements would apply to each of the licences held by the different types of licence holders (see Table 1). The regulatory elements are the following:

• (a) the requirement to be an individual or wholly owned company to be issued a licence;
• (b) the requirement to personally fish the licence;
• (c) the prohibition against transferring the use and control of the rights and privileges under a licence to fish to a fish processor or buyer;
• (d) the prohibition against a fish processor or buyer from using or controlling the rights and privileges under a licence to fish; and
• (e) the requirement for licence holders to not have transferred the use and control of the rights and privileges under a licence to fish to a fish processor or buyer in order to be eligible for the issuance of a licence.

So, where a type of licence or a type of licence holder is not currently subject to one or more elements of the inshore policies, they will continue to be excepted from the corresponding element in the proposed regulatory regime. If the licence holder was not subject to the PIIFCAF policy, this exception will be maintained under the regulatory regime and the licence holder will not be subject to sections 16.2, 19 and 20 of the AFR or sections 5.3, 5.5 and 5.6 of the MPFR.

The proposed licence categories applicable to the AFR and the MPFR are the following:

• An inshore licence held by an Independent Core licence holder, unless
  • it is a licence issued to, or in conjunction with, an exempted fleet in DFO’s Maritimes Region (AFR only)
• A costal licence, unless
  • it is a licence for herring or mackerel issued to a multi-shareholder company (AFR only);
  • it is an elver licence (MPFR only);
• An inshore licence that does not name an operator and is held by an Independent Core licence holder;
• An inshore licence held by the head of a non-core enterprise;
• An inshore licence that does not name an operator and is held by the head of a non-core enterprise; and
• An inshore licence held by a corporation that held an inshore licence before January 19, 1989, unless
  • it is a licence that does not name an operator; or
  • that corporation held the inshore licence before January 1, 1979.

Many of the existing exceptions that have been granted over the years are only valid as long as the particular licence holder remains the holder of the excepted licence. This means that over time, through attrition, most licences would eventually be issued to an Independent Core licence holder and would be subject to all elements of the proposed amendments.

Table 1 below and the following paragraphs provide an overview of the categorization and rationale related to the development of the different categories.

Table 1

If you currently hold…	The following rules currently apply to you and would apply under the proposed Regulations:	Licence category under the proposed amendments (see paragraphs below table)
An inshore licence and you are Independent Core	you need to be an individual or a wholly owned company; you need to personally fish the licence; and you are subject to PIIFCAF currently and will be subject to the new requirement to retain the rights and privileges of the licence.	(a)
A coastal licence	you need to be an individual or a wholly owned company; and you need to personally fish the licence.	(b)
An inshore licence and you are an Independent Core licence holder who has the authorization to designate an operator to fish the licence	you need to be an individual or a wholly owned company; and you are subject to PIIFCAF currently and will be subject to the new requirement to retain the rights and privileges of the licence.	(c)
An inshore licence and you are the head of a non-core enterprise	you need to be an individual or a wholly owned company; and you need to personally fish the licence.	(d)
An inshore licence and you are the head of a non-core enterprise who has the authorization to designate an operator to fish the licence	you need to be an individual or a wholly owned company.	(e)
An inshore licence and you are a pre-1989 company in DFO’s Maritimes Region	you need to personally fish the licence.	(f)
An inshore licence but were excepted from all inshore policies (e.g. a fish harvesters’ association with an allocation, an Indigenous organization with a commercial licence under the AFR)	none — you are personally excepted from all the inshore policy elements being enshrined by the proposed amendments and none of the regulatory provisions will apply until the licence is reissued	Not in a category
An inshore licence but are exempted from the inshore policies (e.g. licences issued in fisheries or fleets where there has been an exemption provided from PIIFCAF, Eastern Nova Scotia snow crab multi-shareholder companies)	you are currently exempted from all the policy requirements being enshrined by the proposed amendments. This exemption will continue to be provided when the licence is reissued.	Not in a category — the proposed regulatory provisions will not apply
A midshore or offshore licence	the inshore policies being enshrined in the proposed Regulations do not apply to your sector.	Not in a category — the proposed regulatory provisions will not apply

(a) Inshore licence held by an Independent Core licence holder

Under the current policy regime, these licences are subject to the Owner-Operator policy, the Fleet Separation policy, the Policy on the Issuance of Licences to Companies and the PIIFCAF policy. These licences represent about 70% of the inshore licences issued in Atlantic Canada and Quebec. Once the proposed regulatory amendments are in place, all proposed provisions would apply.

In 1996, when the Commercial fisheries licensing policy for Eastern Canada - 1996 came into force, the concept of a “core” group of a maximum number of multi-licensed enterprises was adopted for the inshore sector. To qualify as a member of the core group, a licence holder was required to meet specific criteria, such as being the head of an enterprise and being dependent on the fishery. Today, under this concept, new entrants can enter the “core group” only by being reissued the licences of an existing core enterprise.

When PIIFCAF was adopted in 2007, the Independent Core status became a new eligibility criteria, representing heads of core enterprises who were not party to a Controlling Agreement with respect to any inshore fishing licences issued in their name. These inshore licences held by Independent Core licence holders would be reflected in paragraph 12(2)(a) of the AFR and paragraph 5.1(2)(a) of the MPFR of the proposed amendments. Licences that are issued under the AFR to fleets that were exempted from PIIFCAF in the Maritimes Region and certain licences that are issued only in conjunction with certain of these licences would continue to be exempted from the regulatory elements proposed in these amendments. These licences would clearly identify that the proposed sections 16.1, 16.2 and 18 to 20 do not apply to the licences. This would provide clarity for both licence holders and fishery officers.

(b) Coastal licence

Under the current regional policy regime, these licences are subject to the Owner-Operator policy and the Fleet Separation policy. These licences were not included under the current PIIFCAF policy and will not be subject to the prohibition against the transfer of the rights and privileges. Coastal licences are fished with or without a vessel and where fish are generally found closer to shore. These coastal licences would be reflected in paragraph 12(2)(b) of the AFR and paragraph 5.1(2)(b) of the MPFR of the proposed amendments. Herring or mackerel fixed gear licences held by multi-shareholder companies would continue to be exempted under the AFR. Elver licences would also continue to be excepted under the MPFR.

(c) Inshore licence held by an Independent Core licence holder in which an operator is not named

Under the current policy regime, these licences are subject to the Owner-Operator policy, the Fleet Separation policy, the Policy on the Issuance of Licences to Companies, and the PIIFCAF policy. When the Owner-Operator policy was adopted, some licence holders were grandfathered into the regime through an exception to the policy and were allowed to continue to designate an operator (i.e. they are allowed to not fish the licences themselves). This exception was provided in order to not cause undue harm to the licence holder and their fishing operations at the time. These licences currently do not have an operator named in the licence as per paragraph 14(2)(d) of the Atlantic Fishery Regulations, 1985. This exception will not be provided to the next holder of that licence upon reissuance, which means that these licences will eventually be held by an Independent Core licence holder. These inshore licences held by Independent Core licence holders who have a personal exception and use a designated operator would be reflected in paragraph 12(2)(c) of the AFR and paragraph 5.1(2)(c) of the MPFR of the proposed amendments.

(d) Inshore licence held by the head of a non-core enterprise

Under the current policy regime, these licences are subject to the Owner-Operator policy, the Fleet Separation policy and the Policy on the Issuance of Licences to Companies. These inshore licences are held by heads of non-core enterprises. In 1996, when the Commercial fisheries licensing policy for Eastern Canada - 1996 came into force, the head of these enterprises did not qualify as “head of a core enterprise,” but was allowed to continue to hold the inshore licences issued to it. These licences are currently not subject to the PIIFCAF policy; however, upon reissuance to an Independent Core licence holder, these licences would become subject to all the proposed regulatory elements. These inshore licences held by the heads of non-core enterprises would be reflected in paragraph 12(2)(d) of the AFR and paragraph 5.1(2)(d) of the MPFR of the proposed amendments.

(e) Inshore licence held by the head of a non-core enterprise in which an operator is not named

Under the current policy regime, these licences are subject to the Owner-Operator policy and the Fleet Separation policy. These inshore licences are held by the heads of non-core enterprises [similarly to the ones mentioned in licence category (d)], but the current licence holder has been provided with a personal exception from the requirement to personally fish the licence. When the Owner-Operator policy was adopted, some licence holders were grandfathered into the regime through an exception to the policy and allowed to continue to designate an operator (i.e. they are allowed to not fish the licences themselves). This exception was provided in order to not cause undue harm to the licence holder and their fishing operations at the time. These licences currently do not have an operator named in the licence as per paragraph 14(2)(d) of the Atlantic Fishery Regulations, 1985. This exception will not be provided to the next holder of that licence, which means that these licences will eventually be reissued to an Independent Core licence holder and become subject to all the proposed regulatory elements. These inshore licences held by heads of non-core enterprises who have a personal exception making it permissible to use a designated operator would be reflected in paragraph 12(2)(e) of the AFR and paragraph 5.1(2)(e) of the MPFR of the proposed amendments.

(f) Inshore licence held by pre-1989 corporations in the Maritimes Region

Under the current policy regime, these licences are subject to the Owner-Operator policy, the Fleet Separation policy, and the Policy on the Issuance of Licences to Companies. When the Owner-Operator policy was adopted in the Maritimes Region, some corporations (e.g. family businesses) held inshore and coastal licences; these corporations, generally referred to as the pre-1989 corporations, were grandfathered into the regime through an exception to the requirement to be an individual or wholly owned company and were allowed to continue to hold the licences. The majority shareholder of the corporation cannot change and is required to fish the licence personally. Upon reissuance to a new licence holder, these licences can be reissued to another pre-1989 corporation, or be reissued to an Independent Core licence holder. In the latter case, the licence would become subject to all the proposed regulatory elements. These inshore licences held by DFO’s Maritimes Region pre-1989 corporations would be reflected in paragraph 12(2)(f) of the AFR and paragraph 5.1(2)(f) of the MPFR of the proposed amendments.

Inshore licences held by other corporations or organizations that are excepted or exempted from the application of the inshore policies

Under the current policy regime, certain inshore licence holders that are neither Independent Core, nor head of non-core enterprises are currently fully excepted or exempted from the application of the inshore policy requirements. These licences are currently held by pre-1979 corporations, by certain pre-1989 companies that are authorized to designate an operator, by some fish harvesters associations that receive allocations, by Eastern Nova Scotia snow crab multi-shareholder companies and by a few Indigenous organizations that hold commercial licences that are issued under the Atlantic Fishery Regulations, 1985. These licence holders would continue to be fully excepted or exempted from the application of the proposed regulatory amendments.

Regulatory development

Consultations

Over the course of the consultations, DFO informed stakeholders via letters, email, radio interviews and web content of the purpose of the consultation, the dates and locations of in-person information sessions. Information in the form of a presentation was distributed to stakeholders via email and was posted online.

External consultations were launched on July 26, 2018, and were conducted by staff in all relevant DFO regional offices and National Headquarters. DFO engaged stakeholders on proposed changes to the Atlantic Fishery Regulations, 1985 and the elements of the inshore policies that were proposed to be reflected in the Regulations, as well as a proposed prohibition on the separation between the title in a licence to fish from the rights and privileges in a licence to fish. Consultations on the proposed amendments were undertaken in Newfoundland and Labrador, Nova Scotia, New Brunswick, Prince Edward Island and Quebec. The formal consultation period closed in late September 2018; however, input received subsequent to that period was also taken into consideration.

DFO contacted or directly engaged with: (1) harvester organizations, including the Canadian Council of Professional Fish Harvesters and the Canadian Independent Fish Harvesters Federation (the Federation); (2) industry organizations and stakeholders, including the Fisheries Council of Canada, the Atlantic Groundfish Council, the Canadian Association of Prawn Producers, and the Northern Coalition; and (3) provincial governments. DFO also consulted directly with harvesters, licence holders, and other organizations involved in the Atlantic fisheries that may not associate or identify with the aforementioned organizations.

Comments were received both verbally during meetings and via written submissions sent to the Department or the Minister. Below is a summary, organized by interest group, of the central positions and concerns based on comments received.

• (i) Inshore and coastal harvesters: There is widespread support for the inshore policies among inshore and coastal fish harvesters associations and for moving elements of the inshore policies into regulation. However, some individual harvesters have expressed concerns regarding the potential restrictions being placed on how they manage their enterprises and the types of agreements into which they can enter. The main concerns expressed to date relate to existing exemptions and exceptions to the various elements of the proposed amendments, the potential requirement for harvesters to change their corporate structures to be compliant with the new prohibitions, and to the initial proposal to restrict in the Regulations having more than one licence per given species. Stakeholders that are currently captured under one or more exemptions/exceptions wanted to ensure that these will be maintained. It was also requested that current exceptions and exemptions be documented, examined, and made public. Comments were received regarding DFO’s current inability to enforce the existing inshore policies, expectations for regulatory enforcement, and a desire to have the regulations apply to both the licence holders and third parties entering into agreements or arrangements with them.
• (ii) Accountants and lawyers representing fish harvesters: A number of accountants and lawyers identified some potential impacts that the new proposed prohibitions on the separation of title from rights and privileges under a licence to fish could have on their clients. They expressed concerns and provided information about corporate structure models that are currently being used in the inshore and coastal sectors, and how these would be potentially impacted as a result of the proposed amendments.
• (iii) Processing industry: Feedback from fish processors and buyers indicated mixed to low support for the proposed amendments. Some concerns were expressed by the processing industry regarding the reduced flexibility of the Regulations and the potential for the proposed amendments to restrict their capacity to conclude operational business arrangements with licence holders. Industry wanted assurance that the intent of the Regulations is not to prohibit business arrangements, such as supply agreements. Almost all comments received from fish processing companies and buyers showed their interest in being recognized as potential financial lenders under the Notice and Acknowledgement System of the DFO. Support was also expressed for reflecting the exemptions/exceptions found in the inshore policies, in the proposed amendments. They also requested that future exemptions be possible, as is currently the case under the policy.
• (iv) Provinces: DFO presented the proposed amendments during meetings of the Canadian Council of Fisheries and Aquaculture Ministers (CCFAM) Fisheries Act Review Task Group and received formal feedback from multiple provinces. Provinces were generally supportive of the inclusion of the Owner-Operator policy and the Fleet Separation policy elements into regulations. However, comments received from provinces presented contrasting positions on the inclusion of the restriction of one licence per given species as initially proposed, and highlighted the importance of balancing a loss of flexibility and an ability to quickly adapt to changing environmental or economic circumstances as a result of moving from a policy regime to a regulatory regime.

Modifications to the initial proposal

As a result of the consultations and the comments and concerns that were expressed between the summer of 2018 and early 2019, the proposal was modified to reduce potential unintended impacts of the proposal on industry, while maintaining the overall objectives of the proposed Regulations.

Regulations being amended

During the initial consultation, only the Atlantic Fishery Regulations, 1985 were proposed to be amended. However, as inshore and coastal licences in Atlantic Canada are also issued under the authority of the Maritime Provinces Fishery Regulations, DFO is proposing to also amend the latter Regulations to reflect that fact.

One licence per species

Current policy restricts inshore and coastal licence holders to holding only one licence per species. This element was originally included in the regulatory proposal and consultation materials. Comments received from stakeholders illustrated mixed reactions to this element. There was concern by those harvesters who currently benefit from an exception to this policy that they may lose it. Conversely, some stakeholders expressed a desire to see this element of the policy more strictly applied and not allow for exceptions in order to avoid undue concentration.

Over time, there have been many exceptions to the “one licence per species” element of the Owner-Operator policy, mainly where a licence holder has more than one licence for a particular species, but where the gear type or geographic area is different. These exceptions were granted in order to support economic opportunities for harvesters and because they were felt not to undermine the overall objective of the promotion of an independent inshore sector.

Due to the diverse views expressed on this proposed element and the need for further analysis and consultation, this element has been removed from the regulatory proposal at this time, but is maintained in the Commercial fisheries licensing policy for Eastern Canada - 1996 and other regional policies with the existing exceptions. The Department is committed to undertaking further review and consultation regarding the existing exceptions to this policy in order to determine whether and what regulatory amendments should be pursued, if any, at a later date.

Separation of title from rights and privileges

During consultations, the Department received information about how some licence holders have structured their fishing enterprises using different types of corporate structures in order to reduce taxes, protect assets (including the fishing licences they hold), and in some cases, to facilitate the intergenerational transfer of the fishing enterprise. Although these structures generally involve the licence holder conducting the fishing operations and maintaining 100% control over the corporation and decisions relating to the licence, some of these structures would have potentially been in contravention of the proposed prohibition as presented in the initial regulatory proposal as there would have been a transfer of rights and privileges between the elements of the corporate structure, i.e. between the licence holder and the corporations.

Upon further internal analysis and discussions with key stakeholders, DFO is proposing to focus the scope of the prohibitions on a prohibition against the transfer of the rights and privileges to fish processors and buyers. This modification reflects the long-standing intent of the inshore policies and of the proposed prohibitions, i.e. to maintain a separation between the fishing sector and fish processing/buying sector and to ensure that eligible licence holders have independent access to the resource and retain the benefits from the harvest.

Stakeholders have expressed concerns regarding the inordinate amount of influence that large corporations in the fish processing/buying sector have on the market price of fishing enterprises and the recommendation regarding to whom the licence should be reissued (commonly referred to as “licence transfer”). Large corporations are typically able to offer better prices, driving the prices up and making it more challenging for prospective new entrants to afford a fishing enterprise. Ensuring the separation of the fishing sector from the fish processing/buying sector through a clear prohibition will address the concerns of stakeholders by maintaining the distribution of wealth and employment opportunities across small communities.

Based on information received from fish harvesters’ associations, accountants and lawyers, significant costs would have been assumed by licence holders that would have needed to restructure their corporate affairs in order to comply with the original proposed prohibition. In addition, there would have been impacts on their ability to avail themselves of tax and Employment Insurance benefits as well as to protect assets, such as the licence, from liability.

A more focused scope for the prohibition will still allow the overall regulatory objectives to be achieved without penalizing harvesters that use corporate structures established to improve the economic viability of their fishing enterprises. The proposed prohibitions with a focus on the fish processing/buying sector will allow the Department to prevent these entities from gaining access to the fisheries resource for which they are ineligible.

Indigenous engagement and consultations

DFO reached out to national and regional Indigenous organizations to inform them of the proposed amendments and to provide them with an opportunity to comment, even though the proposed amendments will not apply to fishing and related activities carried out under the Aboriginal Communal Fishing Licences Regulations (ACFLR), the mechanism by which communal fishing licences are issued to an Indigenous organization to carry out fishing for food, social and ceremonial (FSC) purposes and commercial purposes.

The Department contacted seven national and pan-regional Indigenous organizations including the Assembly of First Nations, the Inuit Tapiriit Kanatami, the Metis National Council, the Native Women’s Association of Canada, the First Nations Fisheries Council, the Atlantic Policy Congress and the First Nations of Quebec and Labrador Sustainable Development Institute (FNQLSDI). DFO extended invitations to meet, and encouraged the submission of views and feedback on the proposed amendments. The regulatory proposal was also the subject of one of DFO’s Ecosystems Management Directorate’s semi-annual calls with Indigenous groups and management boards that was held in September 2018.

The majority of Indigenous engagement and consultations were led by DFO staff in regional offices. In July 2018, DFO’s Quebec Region presented the consultation materials at a meeting with the Liaison Committee between DFO and Quebec’s harvesting sector. Attending stakeholders included two representatives from Indigenous associations in addition to representatives from associations (Gaspésie-Bas-Saint-Laurent, Îles-de-la-Madeleine, and Côte-Nord) and the ministère de l’Agriculture, des Pêcheries et de l’Alimentation du Québec (MAPAQ). DFO’s Quebec Region also contacted 36 representatives from Indigenous organizations via email to provide information on the proposed amendments and invite feedback.

In August 2018, the Department met with representatives from the Maritimes Aboriginal Peoples Council, and Native Councils of Nova Scotia, New Brunswick, and Prince Edward Island, who expressed concern about the use of the word “rights” when describing the limited rights and privilege conveyed by an inshore licence, as opposed to Indigenous Treaty rights. The limited rights granted to a licence holder (e.g. the access to the fishery and the proprietary right to the fish harvested and the proceeds from their catch) are different and unrelated to the Indigenous and treaty rights granted under section 35(1) of the Constitution Act, 1982.

Feedback provided by the Unama’ki Institute of Natural Resources (UINR) expressed concerns about the quantity of proposed exemptions/exceptions within the proposed amendments due to concerns of corporate influence on Owner-Operator and Fleet Separation. The Mi’kmaq Rights Initiative (Kwilmu’kw Maw-klusuaqn Negotiation Office) expressed support for the substitute-operator policy and the proposed amendments.

The Department will continue efforts to engage with Indigenous groups, partners, and stakeholders on implementation to ensure that there is a clear understanding of which licences would be subject to the proposed amendments.

Modern treaty obligations

During the assessment of modern treaty implications (AMTI) process, DFO identified that the proposed regulatory amendments would take effect in and/or take place adjacent to geographic areas subject to modern treaties in Atlantic Canada and Quebec. In Quebec, modern treaties include the James Bay and Northern Quebec Agreement and Complementary Agreements, Nunavik Inuit Land Claims Agreement, and Crees of Eeyou Istchee Regional Marine Land Claims Agreement. In Newfoundland and Labrador, one modern treaty was identified: the Labrador Inuit Land Claims Agreement.

The geographic scope of the proposed amendments is limited to Atlantic Canada and Quebec and specifically excludes licences issued under the Aboriginal Communal Fishing Licences Regulations (ACFLR). Indigenous organizations that fish under the authority of the ACFLR will therefore not be impacted by these proposed amendments. Indigenous individuals who hold inshore and coastal commercial licences issued under the Atlantic Fishery Regulations, 1985 and the Maritime Provinces Fishery Regulations are currently subject to the inshore policies and will therefore be regulated as other non-indigenous commercial licence holders in these sectors. Indigenous organizations that hold inshore commercial licences issued under the Atlantic Fishery Regulations, 1985 will continue to be excepted from the application of the elements of the inshore policies that will be incorporated in the regulations.

The AMTI concluded that implementation of this proposal will likely not have an impact on the rights, interests and/or self-government provisions of the James Bay and Northern Quebec Agreement and Complementary Agreements, Nunavik Inuit Land Claims Agreement, Crees of Eeyou Istchee Regional Marine Land Claims Agreement, or on Labrador Inuit Land Claims Agreement treaty partners.

DFO sent letters and consultation materials to the modern treaty partners in Quebec (Nunavik Marine Region Wildlife Board and Eeyou Itschee Wildlife Management Board), and Newfoundland and Labrador (Nunatsiavut Government [NG] and Torngat Joint Fisheries Board) to ensure that they are aware of the proposal. No issues or concerns were raised pertaining to these modern treaties.

Instrument choice — The rationale for regulations

Need for enforceable rules

Over the last 40 years, DFO has attempted to support the independence of the inshore fishery sector in Atlantic Canada and Quebec through the use of different types of policy instruments. Policies and education were used to deter corporate concentration of licences, promote locally owned independent fishing enterprises, and to help support and grow fishery-dependent communities. However, despite these policies being in place, licences in the inshore sector began to become the subject of agreements and arrangements that undermined these objectives. In order to address this issue, DFO undertook a major consultation process in 2004 that led to the introduction of a new policy instrument called PIIFCAF in 2007. However, even with better education and communication regarding the applicable rules and intended goals, there remain attempts to circumvent the policies. Stakeholders want to see stronger measures being taken to address fish processors and buyers that are attempting to assert control over benefits for which they are not eligible.

Policy reinforcement measures

In response to these concerns, DFO implemented, in 2015, new policy-based administrative measures to reinforce the application of the PIIFCAF policy.

Should DFO determine through an administrative review that a licence holder is party to a Controlling Agreement, that licence holder would lose his Independent Core (IC) status and no longer be eligible for the issuance of a licence the following year. Under the current regime, this type of licensing decision could be appealed and reviewed by the Regional PIIFCAF Review Committee and the Atlantic Fisheries Licence Appeal Board (AFLAB), with the Minister ultimately making the final decision as to whether the licence holder should retain their IC status, and eligibility to hold the licence that is the subject to the agreement.

This administrative review process, from the original licensing decision to the final ministerial decision, can take a significant amount of time to complete. While the licensing decision is under the DFO appeal process, DFO allows the licence holder to renew the licence and continue fishing. Furthermore, because this process is policy-based, the flexibility and discretion that are part of a fair and transparent licensing system can be exploited by licence holders and third parties in an attempt to affect or delay the ultimate decision. Finally, the primary objective of the administrative process is not to penalize, but instead to bring licence holders in line with the policy requirements. Stakeholders are of the view that this approach has been ineffective at changing behaviour.

The proposed regulatory approach would allow for enforcement of the rules by making it an offence for a licence holder to transfer rights and privileges conferred under a licence to a fish processor or buyer. The regulated licensing eligibility criteria would also render ineligible a licence holder that has made such a transfer. The proposed amendments would also impose a requirement for licence holders to personally fish the licence issued to them and a requirement on the Minister to only issue licences to individuals or wholly owned companies (subject to existing exceptions).

The Owner-Operator policy, the Fleet Separation policy, the Policy on the Issuance of Licences to Companies and the PIIFCAF policy have strong support among members of stakeholder associations in the inshore sector. These stakeholder groups have previously questioned the effectiveness of the current administrative reinforcement regime, and requested that the Department adopt a more stringent approach to upholding the independence of the inshore sector, by making policy elements enforceable under the Fisheries Act. The proposed amendments to the Atlantic Fishery Regulations, 1985 and the Maritime Provinces Fishery Regulations would provide the enforceability sought by the stakeholders who will ultimately be operating under the authority of the new regulatory regime.

Maintaining the current scope and exceptions/exemptions

The regulatory amendments propose to maintain the current scope of application of the inshore policies. As each of the inshore policies were introduced over time, it was recognized that the application of these policies in some specific cases would have been more disruptive than beneficial. It was decided to allow certain fleets, companies or organizations to remain outside the scope of the policies because they were either corporations that could not meet the Owner-Operator and Fleet Separation requirements or because, at the time PIIFCAF was implemented, these fleets had already experienced significant restructuring and rationalization as a result of the Individual Transferable Quota program and had reorganized their enterprises in a way that may not have met the PIIFCAF requirements.

Regulatory analysis

Costs and benefits

Costs

The incremental costs associated with the proposed amendments are expected to be none to minimal.

Owner-Operator, Fleet Separation and Issuing Licences to Companies elements: Although it changes slightly from year to year, in 2017, 83% of the licence holders in Atlantic Canada and Quebec ^{footnote 2} were in the inshore sector. As stated in the previous sections, some inshore and coastal licences are excepted (around 700 licences, including about 600 licences excepted from the requirement to personally fish) or exempted (182 licences) from the application of the policies. Certain licence holders may hold multiple excepted/exempted licences while others will hold none. These excepted/exempted licence holders represent a small portion of the overall number of inshore licence holders (13 470 in 2017 ^{footnote 3}) in Atlantic Canada and Quebec.

The proposed amendments would establish criteria that the Minister already considers in licensing decisions through the Owner-Operator policy, the Fleet Separation policy, and the Policy on the Issuance of Licences to Companies, i.e. to issue licences to individuals or wholly owned companies. As DFO intends to carry forward all current exemptions and exceptions that exist in policy, moving to regulations is not expected to have any incremental impact on the licence holders that already meet the requirements of the existing regime. Furthermore, the regulatory element requiring that a licence holder, or their substitute-operator, personally fish the licence is not new. It will rather work with subsection 14(2) of the Atlantic Fishery Regulations, 1985, which prohibits fishing for people who do not meet the prescribed requirements.

Rights and privileges element: It is anticipated that the majority of Independent Core licence holders will already be compliant with this element of the proposed Regulations. Licence holders currently must self-declare annually that they are not in a Controlling Agreement under PIIFCAF. It is likely that agreements or arrangements with a third party that is involved in the fish processing/buying sector and that involve the separation of licence title from the rights and privileges of a licence, would include some element of control or influence over the decision by the licence holder to recommend licence reissuance and therefore would likely result in non-compliance with the PIIFCAF policy.

Despite having declared that they are not in a Controlling Agreement, there are some licence holders that DFO has placed under review due to potential non-compliance with the PIIFCAF policy. Cases are either in the administrative review stage or the appeal stage. There may also be licence holders who do not meet PIIFCAF requirements but who have not been identified yet by the Department in its PIIFCAF administrative reinforcement efforts. These licence holders may not be in compliance with the prohibition against the separation of licence title and rights and privileges under a licence, and would need to adjust their business arrangements.

Since the agreements between licence holders and their business partners in the fish processing/buying sector are unique and information on how many licence holders may have entered into these agreements is not readily available, DFO is not in a position to provide any specific cost estimates. However, it is assumed that any cost associated with renegotiating or restructuring non-compliant agreements would be assumed only by those who have entered into Controlling Agreements with fish processors or buyers in contravention to existing DFO policies.

In addition, since the licence holder makes a declaration at issuance of the licence or renewal of the licence to demonstrate eligibility to receive the licence, making a false declaration to obtain a licence would be an offence under the Fisheries Act and could lead to charges, to prosecution and ultimately to penalties established under the Act. As the compliance impacts are not a consequence of the Regulations, but rather due to existing policy requirements, associated costs are not attributable to the Regulations.

Cost to Government: The Department will implement the new provisions in the following manner: the review of the new licensing eligibility criteria will be carried out as an administrative function as part of DFO’s licensing process, and the prohibitions on the separation of title from the rights and privileges in a licence to fish will be enforced by DFO’s enforcement branch. In addition to existing resources dedicated to licensing and enforcement, resources have been reallocated internally to support administrative review of eligibility criteria and enforcement of the proposed amendments by fishery officers. Therefore, the proposed amendments should be cost-neutral for DFO and the Government of Canada.

Benefits

Ensuring that all licence holders abide by the proposed amendments maintains a level playing field and reduces the risk that the current social, economic and cultural benefits associated with independently owned fishing enterprises are diverted away from the inshore and coastal fishing sectors. Providing enforcement abilities to DFO would generate disincentives for future violations, close the policy loopholes that could be exploited, and provide the tools necessary to penalize those who violate the rules.

The commercial fishery is the socio-economic backbone of many rural and remote communities across Atlantic Canada and Quebec with prominent cultural importance. DFO has conducted research on fishery-dependent communities, defined as those where fishing incomes (i.e. fish harvesting and processing) account for over 20% of the community’s employment incomes. A total of 79 communities in the geographic region were assessed to be fishery-reliant in 2015, of which 57% were located in Newfoundland and Labrador. In addition, 411 communities in Atlantic Canada and Quebec had at least 10 fisheries-related workers. These Regulations are expected to promote viable and profitable operations for the average fishing enterprise in Atlantic Canada and Quebec by keeping the control of the licences in the hands of independent owner-operators, and the economic benefits in the communities.

Clear and repeated input and requests throughout both consultations and the entire regulatory development process show that rural residents in Atlantic Canada and Quebec support DFO’s inshore objectives and place value on strengthening and clarifying the inshore policy suite through regulations.

Small business lens

Small businesses form the majority of the stakeholders currently operating under the inshore policies. These policies, which form the basis of the proposed amendments, are intended to protect and promote the viability of small businesses in Atlantic Canada and Quebec. However, there are no expected cost impacts associated with the proposed amendments.

“One-for-One” Rule

The “One-for-One” Rule does not apply, as this regulatory amendment proposal is not expected to increase administrative costs for small or other businesses. Applications for licence renewal or issuance are expected to remain unchanged.

Strategic environmental assessment

The proposed amendments would enshrine elements of the inshore fisheries policies into law. These new Regulations would help ensure that the independence and economic viability of the inshore sector is maintained and further strengthened, and that the socio-economic and cultural environment of the coastal communities in Eastern Canada is preserved by keeping a strong link between the licence holders and the economic benefits derived from the privileged access to this common property resource.

Enshrining the inshore policies into regulations will not change harvesting practices or harvesting levels. The Department will maintain the implementation of other policies aimed at supporting the sustainability of fisheries.

Gender-based analysis plus

During the stakeholder consultations on the proposed amendments, several concerns were raised specific to identity factors. These concerns included impacts on youth and older harvesters (age), fisheries industry / business viability and relationships (income) and impacts on communities (geography).

Following a gender-based analysis plus (GBA+) assessment, no significant impacts were identified that might disproportionately affect any specific groups, demographics, or identity factors (or combinations thereof) as a result of the proposed regulatory changes.

Implementation, compliance and enforcement

Implementation

The implementation of the proposed licensing eligibility criteria will be carried out as an administrative function of DFO’s licensing process, while the enforcement of the proposed prohibitions against separating the title in a licence from the rights and privileges under a licence will be carried out by DFO’s Conservation and Protection Branch.

The new regulatory provisions would come into effect following final publication in the Canada Gazette, Part II. Once the regulations are in place, adjustments to existing policies would be made as necessary to reflect the regulatory changes.

As stated earlier, the proposed prohibition against the licence holder transferring the rights and privileges under the licence to fish processors or buyers is not intended to impact the regular operations of fishing enterprises. Education and outreach would be required to ensure that licence holders understand how to craft agreements and arrangements such as supply agreements, vessel charters, etc., in a manner that allows them to retain the rights and privileges of the licence.

Education and outreach efforts would be made to ensure a smooth transition from policy to Regulations. The proposed amendments would be supported by both internal and external guidance focusing on implementation. This could include, but is not limited to

• guidance on how to achieve compliance with the new Regulations; and
• internal guidelines and training intended to offer guidance to licensing staff and fishery officers.

Compliance and enforcement

The proposed amendments pertaining to the Owner-Operator provision (i.e. the requirement to personally fish a licence) would be enforced by fishery officers through regular on-the-water inspections, ensuring that the licence holder is present on the vessel, or that a substitute-operator has been authorized by DFO.

Upon boarding a vessel, DFO fishery officers would request to see a copy of the licence or the substitute-operator authorization documentation. Based on the categorization of licences, the fishery officer would be able to determine if some or all of the proposed regulatory provisions apply.

The proposed regulatory provisions related to the Fleet Separation policy and Issuance of Licences to Companies policy (i.e. licences issued to individual or wholly owned company only) would be implemented as part of the licence issuance process. The onus would be on DFO to ensure that licences are only issued to individuals or wholly owned companies. New applicants would be required to prove to DFO licensing officials that they are eligible to be issued a licence to fish. Renewing applicants would continue to be required to declare any changes in controlling interest of a corporation that holds a licence to DFO as per existing policies. Providing false information to a licensing officer is a prosecutable offence under the Fisheries Act.

The proposed regulatory provisions prohibiting the transfer of the rights and privileges under a licence to a fish processor or buyer and the prohibition against a fish processor and buyer using or controlling the rights and privileges under a licence would be enforced though established departmental enforcement approaches and procedures.

The implementation of the proposed regulated eligibility criteria to be issued licences to Independent Core applicants would build on the existing administrative review process and would be applied through licensing processes. It is expected that the current declaration made by the licence holders to the effect that they meet the requirements of PIIFCAF would be modified to include language that reflects the new eligibility criteria to the effect that applicants for licences referred to under paragraph 12(2)(a) and (c) of the Atlantic Fishery Regulations, 1985 and licences referred to under paragraph 5.1(2)(a) and (c) of the Maritime Provinces Fishery Regulations must not have transferred the rights and privileges in a licence to a fish processor or buyer. Licensing officers would assess the eligibility of the applicant for that requirement via that self-declaration and would continue to flag triggers that may indicate that a licence holder is non-compliant with the Regulations. Triggers have been developed based on previous cases and include elements such as who pays for the fees associated with the licences, if the licence holder fishes using their own vessel, etc. Raising triggers does not in itself indicate non-compliance, but rather is a means for the Department to identify licence holders that may need to have their circumstances further reviewed.

The Department can also request information from licence holders, pursuant to section 8 of the Fishery (General) Regulations, in order to satisfy the Department that they meet the eligibility criteria for the issuance of a licence. If an applicant were found to be ineligible, the licence would not be issued.

Instances of potential non-compliance with the proposed Regulations could also be identified or referred to DFO’s Conservation and Protection Branch. The file would then be assigned to a fishery officer for review. The fishery officer would determine if enforcement action is required and, if necessary, in accordance with authorities conferred under the Fisheries Act, initiate a series of activities that may include, but are not limited to, accessing departmental files including any prior information submitted as part of an administrative review process, requesting additional information including access to existing contracts and agreements, inspecting the professional offices or accounts of both the licence holder and the processor or buyer, accessing financial information including, subject to any applicable prior lawful authority, accessing information held by financial institutions or the Canada Revenue Agency.

If, following analysis of the additional information, a fishery officer has reasonable grounds to believe that an offence under the Fisheries Act has been committed, a more formal investigation may follow, which may lead to charges, prosecution, and ultimately to penalties.

Once the proposed Regulations are in place, the Department also intends to work with fisheries associations to identify additional methods for promoting compliance within the sector.

Contact

Fisheries and Oceans Canada
Subject: Independence of the Inshore Fishery Regulations
200 Kent Street, 14W-096
Ottawa, Ontario
K1A 0E6
Email: DFO.IndependentFishers-PecheursIndependants.MPO@dfo-mpo.gc.ca

PROPOSED REGULATORY TEXT

Notice is given that the Governor in Council, pursuant to subsection 43(1) ^{footnote a} of the Fisheries Act ^{footnote b}, proposes to make the annexed Regulations Amending Certain Regulations Made Under the Fisheries Act.

Interested persons may make representations with respect to the proposed Regulations within 30 days after the date of publication of this notice. All such representations must cite the Canada Gazette, Part I, and the date of publication of this notice, and be sent to the following email address: DFO.independentfishers-pecheursindependants.MPO@dfo-mpo.gc.ca.

Ottawa, June 27, 2019

Julie Adair
Assistant Clerk of the Privy Council

Regulations Amending Certain Regulations Made Under the Fisheries Act

Atlantic Fishery Regulations, 1985

1 Subsection 3(5) of the Atlantic Fishery Regulations, 1985 ^{footnote 4} is replaced by the following:

(5) Sections 13 to 14, 17, 17.1, 18 to 20, 39 to 45 and 46 to 50, subsection 51.3(1) and sections 51.4, 52, 54, 57, 61, 61.1, 63, 66, 68, 69, 70.1 to 72, 74, 77, 78, 80, 82, 83, 87, 90, 91, 99, 106, 106.1 and 108 to 115.1 do not apply with respect to fishing and related activities carried out under the authority of a licence issued under the Aboriginal Communal Fishing Licences Regulations and sections 16.1 and 16.2 do not apply to the issuance of licences under those Regulations.

2 The heading before section 12 of the French version of the Regulations is replaced by the following:

Définitions et interprétation

3 Section 12 of the Regulations is replaced by the following:

12 (1) The following definitions apply in this Part.

• document means a fisherman’s registration card, a vessel registration card or a licence; (document)
• fish buyer means
  • (a) the holder of a licence to buy fish issued under provincial legislation;
  • (b) if the licence holder referred to in paragraph (a) is a corporation, any person who holds a right or interest in that corporation;
  • (c) a corporation in which the licence holder referred to in paragraph (a) holds a right or interest; and
  • (d) a person over which the licence holder referred to in paragraph (a), the person referred to in paragraph (b) or the corporation referred to in paragraph (c) exercises direct or indirect control; (acheteur de poisson)
• fish processor means
  • (a) the holder of a licence to process fish issued under provincial legislation;
  • (b) if the licence holder referred to in paragraph (a) is a corporation, any person who holds a right or interest in that corporation;
  • (c) a corporation in which the licence holder referred to in paragraph (a) holds a right or interest; and
  • (d) a person over which the licence holder referred to in paragraph (a), the person referred to in paragraph (b) or the corporation referred to in paragraph (c) exercises direct or indirect control. (transformateur de poisson)

(2) For the purposes of sections 16.1, 16.2 and 18 to 20, the licences referred to in those sections are as follows:

• (a) an inshore fishing licence in which an operator is named and that is held by an independent core licence holder, other than a licence to fish for the following species that indicates that sections 16.1, 16.2 and 18 to 20 of these Regulations do not apply:
  • (i) groundfish, if the licence provides for an individual transferable quota, the use of fixed gear and the use of a vessel having an overall length of at least 13.7 m but not more than 19.8 m,
  • (ii) groundfish, if the licence provides for an individual transferable quota, the use of mobile gear and the use of a vessel having an overall length of less than 19.8 m,
  • (iii) herring, if the licence provides for the use of a purse seine,
  • (iv) scallop, in respect of the full bay fleet,
  • (v) shrimp, if the licence provides for the use of mobile gear in any of Shrimp Fishing Areas 13 to 15,
  • (vi) swordfish, if the licence provides for the use of a longline,
  • (vii) tuna, if it is a restricted licence and issued with a licence referred to in subparagraph (vi),
  • (viii) bluefin tuna, in respect of the southwest Nova Scotia fleet, and
  • (ix) sculpin, if the licence is issued with a licence referred to in subparagraph (ii);
• (b) a coastal fishing licence, other than a licence to fish for herring or mackerel using fixed gear that is issued to a corporation with more than one shareholder;
• (c) an inshore fishing licence in which an operator is not named and that is held by an independent core licence holder;
• (d) an inshore fishing licence in which an operator is named and that is held by the head of a non-core enterprise;
• (e) an inshore fishing licence in which an operator is not named and that is held by the head of a non-core enterprise; and
• (f) an inshore fishing licence held by a corporation that held such a licence before January 19, 1989 unless
  • (i) an operator is not named in the licence, or
  • (ii) the corporation held an inshore fishing licence before January 1, 1979.

4 The Regulations are amended by adding the following after section 16:

Eligibility Criteria for Certain Licences

16.1 Licences referred to in paragraphs 12(2)(a) to (e) may only be issued to

• (a) an individual or their estate or succession; or
• (b) a corporation, all of the shares of which, belong to one individual.

16.2 (1) Subject to subsection (2), a licence referred to in paragraph 12(2)(a) or (c) shall not be issued if, at the time of application, the applicant has transferred to a fish processor or fish buyer the use or control of rights or privileges conferred under a licence

• (a) that is held by the applicant; or
• (b) that may be issued to the applicant pursuant to the application.

(2) Subsection (1) does not apply in the case where a person exercises their rights as a creditor with respect to a security in the licence under provincial legislation.

5 The Regulations are amended by adding the following after section 17.1:

Requirements for Certain Licences

18 In the case of a licence referred to in paragraph 12(2)(a), (b), (d) or (f), one of the following persons shall personally carry out the activities authorized under the licence:

• (a) the holder of the licence;
• (b) the operator named in the licence; or
• (c) a person authorized in accordance with subsection 23(2) of the Fishery (General) Regulations.

19 Except in the case referred to in subsection 16.2(2), no holder of a licence referred to in paragraph 12(2)(a) or (c) shall transfer the use or control of the rights or privileges conferred under that licence to a fish processor or fish buyer.

20 Except in the case referred to in subsection 16.2(2), a fish processor or fish buyer shall not use or control the rights and privileges conferred under a licence referred to in paragraph 12(2)(a) or (c).

Maritime Provinces Fishery Regulations

6 The Maritime Provinces Fishery Regulations ^{footnote 5} are amended by adding the following after section 5:

Eligibility Criteria and Requirements for Certain Licences

5.1 (1) The following definitions apply in sections 5.3, 5.5 and 5.6.

• fish buyer means
  • (a) the holder of a licence to buy fish issued under provincial legislation;
  • (b) if the licence holder referred to in paragraph (a) is a corporation, any person who holds a right or interest in that corporation;
  • (c) a corporation in which the licence holder referred to in paragraph (a) holds a right or interest; and
  • (d) a person over which the licence holder referred to in paragraph (a), the person referred to in paragraph (b) or the corporation referred to in paragraph (c) exercises direct or indirect control; (acheteur de poisson)
• fish processor means
  • (a) the holder of a licence to process fish issued under provincial legislation;
  • (b) if the licence holder referred to in paragraph (a) is a corporation, any person who holds a right or interest in that corporation;
  • (c) a corporation in which the licence holder referred to in paragraph (a) holds a right or interest; and
  • (d) a person over which the licence holder referred to in paragraph (a), the person referred to in paragraph (b) or the corporation referred to in paragraph (c) exercises direct or indirect control. (transformateur de poisson)

(2) For the purposes of sections 5.2 to 5.6, the licences referred to in those sections are as follows:

• (a) an inshore commercial fishing licence in which an operator is named and that is held by an independent core licence holder;
• (b) a coastal commercial fishing licence, other than a commercial fishing licence to fish for elver;
• (c) an inshore commercial fishing licence in which an operator is not named and that is held by an independent core licence holder;
• (d) an inshore commercial fishing licence in which an operator is named and that is held by the head of a non-core enterprise;
• (e) an inshore commercial fishing licence in which an operator is not named and that is held by the head of a non-core enterprise; and
• (f) an inshore commercial fishing licence held by a corporation that held such a licence before January 19, 1989 unless
  • (i) an operator is not named in the licence, or
  • (ii) the corporation held an inshore commercial fishing licence before January 1, 1979.

5.2 Licences referred to in paragraphs 5.1(2)(a) to (e) may only be issued to

• (a) an individual or their estate or succession; or
• (b) a corporation, all of the shares of which, belong to one individual.

5.3 (1) Subject to subsection (2), a licence referred to in paragraph 5.1(2)(a) or (c) shall not be issued if, at the time of application, the applicant has transferred to a fish processor or fish buyer the use or control of rights or privileges conferred under a licence

• (a) that is held by the applicant; or
• (b) that may be issued to the applicant pursuant to the application.

(2) Subsection (1) does not apply in the case where a person exercises their rights as a creditor with respect to a security in the licence under provincial legislation.

5.4 In the case of a licence referred to in paragraph 5.1(2)(a), (b), (d) or (f), one of the following persons shall personally carry out the activities authorized under the licence:

• (a) the holder of the licence;
• (b) the operator named in the licence; or
• (c) a person authorized in accordance with subsection 23(2) of the Fishery (General) Regulations.

5.5 Except in the case referred to in subsection 5.3(2), no holder of a licence referred to in paragraph 5.1(2)(a) or (c) shall transfer the use or control of the rights or privileges conferred under that licence to a fish processor or fish buyer.

5.6 Except in the case referred to in subsection 5.3(2), a fish processor or fish buyer shall not use or control the rights and privileges conferred under a licence referred to in paragraph 5.1(2)(a) or (c).

Coming into Force

7 These Regulations come into force on the day on which they are registered.