Kitty Simonds
Executive Director
Western Pacific Fishery Management Council
1164 Bishop Street
Suite 1400
Honolulu, Hawaii 96813
Dear Ms. Simonds:
The Office of Advocacy of the U.S. Small Business Administration (SBA) was established by Congress under Pub. L. No. 94-305 to advocate the views of small business before federal agencies and Congress. Advocacy is also required by §612 of the Regulatory Flexibility Act (RFA) (5 U.S.C. 601-612) to monitor agency compliance with the RFA. On March 28, 1996, President Clinton signed the Small Business Regulatory Enforcement Fairness Act which made a number of significant changes to the Regulatory Flexibility Act, the most significant being provisions to allow judicial review of agencies' regulatory flexibility analyses.
On June 9, 1998, the National Marine Fisheries Service(NMFS) published a proposed rule in the Federal Register, Vol. 63, No. 110, p. 31406 on Fisheries Off West Coast States and in the Western Pacific; Western Pacific Crustacean Fisheries; Bank Area Specific Harvest Guidelines. The proposed rule allocates the 1998 overall harvest guideline for spiny and slipper lobsters.
In the proposal, the NMFS states that it prepared an Initial Regulatory Flexibility Analysis (IRFA). The classification in the proposal provided a description of the size of the industry; a statement on recordkeeping requirements; statement on overlapping and duplicative rules; an assertion that alternatives are analyzed in the IRFA; and conclusion that participants will incur increased costs but the proposed action should result in long term economic benefits to the fishery. There was no quantitative information in the summary to provide the public with information for assessing the true nature of the impact or for providing meaningful comments.
The Office of Advocacy's initial response in reviewing the classification in the proposal was that NMFS had failed to provide an adequate summary of the IRFA as required by 5 USC §603(a). The lack of an adequate summary was bothersome. Without the actual IRFA, a small business could not assess the impact of the proposal. In that the comment period was a mere 15 days, it is questionable as to whether a small business could obtain the IRFA, analyze the material, and prepare meaningful comments. Upon reading the actual IRFA, however, the Office of Advocacy concludes that the summary provided merely reflects what is in the IRFA, namely a deficiency of quantitative data.
The IRFA Is Insufficient For RFA Purposes
The RFA states:
"an agency shall prepare and make available for public comment an initial regulatory flexibility analysis. Such analysis shall describe the impact of the proposed rule on small entities." 5 USC §603(a).
The IRFA for the proposal is devoid of information necessary to ascertain the impact of the rule. Although the analysis sets forth NMFS criteria for determining significant economic impact (i.e. reduction in gross revenues of more than 5 percent, a 5 per cent increase in costs, 2 per cent of businesses being forced to cease operations, etc.), the criteria is not used to determine the economic impact of the proposal on small entities. Instead, NMFS merely concludes that the "qualitative analysis presented above suggests that the proposed action is expected to have no net negative economic impact on those businesses that participate in the NWHI lobster fishery-rather the long-term impact is expected to be positive."
The "qualitative analysis" referred to in this quotation consists of vague statements about the three alternatives and a table on the qualitative impact. The table simply states the alternatives, and rates the benefits and costs as high, moderate, and low. There is no indication of the basis for determining whether a cost or benefit is high, moderate, or low. Without providing the basis, the public is unable to ascertain whether the assumptions are accurate or if the agency has simply employed an arbitrary standard.
NMFS's Conclusion of No Negative Net Economic Impact Is Questionable
The data that is provided leads the Office of Advocacy to question the conclusion of no negative net economic impact on the businesses that participate in the fishery. For example, if one of the 12 businesses cease operations, the 2 per cent threshold in NMFS's criteria is met. Moreover, the harvest guide line of 286,000 lobsters is 12% reduction from the previous year guideline of 322,000. The 12% reduction coupled with the projected moderate increase in costs could be a significant economic impact. Finally the fact that only 5 vessels of 15(1) are expected to participate in the fishery leads to questions about the declining participation and the overall profitability of the industry that need to be addressed explicitly and justified, if possible in light of other policy or programmatic considerations.
NMFS's Reason for Lack of Quantitative Information Is Unconvincing
Although NMFS states that "a quantitative analysis beyond inflation adjustments of previous operational parameters is not possible" because the fishery data has not been updated since a bioeconomic model utilizing data from 1983-1989, the Office of Advocacy asserts that NMFS's contention is unconvincing. By NMFS's own admission, the fishery consists of only 12 permit holders, all of which are located in the State of Hawaii. It should not be that difficult for NMFS to obtain the information that it needs to perform a quantitative economic analysis of the proposal.
The RFA does not state that an agency cannot impose a regulation that may have a significant economic impact on a substantial number of small entities. It simply requires an agency to perform an economic analysis of the rule and consider the alternatives to the regulation. Forthright information and proper justification are necessary for small businesses to be able to understand the necessity and the potential effects of a proposed action so that the industry can make informed decisions and comments about the proposal, evaluate NMFS' s rationale, and consider the possible regulatory alternatives. Without such an analysis, NMFS has not met the intent of the RFA, the justification required by the Administrative Procedures Act, and is not abiding by the law.
If you would like to discuss this matter or if this office can be of any further
assistance, please contact Jennifer A. Smith. She may be reached either by mail at the
above address or by telephone at (202) 205-6943.
Sincerely,
Jere W. Glover
Chief Counsel
Office of Advocacy
Jennifer A. Smith
Assistant Chief Counsel
for Economic Regulation
ENDNOTE
1. The analysis indicates that there are 12 permit holders that own a total of 15 vessels, 5 of which will participate in the fishery. There is no information as to whether the 5 vessels are owned by separate permit holders.