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COMMERCIAL FISHERIES

Q: Where can a foreign investor find the substantive limits on foreign investment in U.S. flag fishing vessels?
A: The Magnuson-Stevens Fishery Conservation and Management Act provides the basic framework for the conservation and management of all fisheries within the United States Exclusive Economic Zone (EEZ). The Act provides U.S. flag vessels and fish processors first priority access to the fishery resources of the EEZ and fish caught in the EEZ.

Q: Can foreign flag vessels fish in the EEZ?
A: Yes, only if they receive permits from the U.S. government and then only to the extent that surplus fish are available.

Q: Do U.S. flag vessels have to be owned completely by U.S. citizens?
A: No, but 75% of the vessel-owning entity’s equity must be owned and controlled by U.S. citizens for vessels documented with fishery endorsements.

Q: How do the vessel documentation laws define a noncitizen or foreigner?
A: The laws make the determination based on the citizenship of an entity's stockholders, directors, CEO, and existence of overseas offices or operations.

Q: Are the citizenship requirements the same for all trades in which a vessel may be employed?
A: No, it depends on the trade:
  • Foreign trade – vessel owner must qualify as a Documentation Act Citizen;
  • Domestic/Coastwise trade – vessel owner must meet the 75% U.S. citizen ownership standard;
  • U.S. fisheries – vessel owner must have fisheries endorsement and meet the 75% U.S. citizen ownership standard as a fishery citizen, plus certain additional requirements.
Q: Who can qualify as a documentation act citizen?
A: All of the following:
  • An individual who is a U.S. citizen
    • An association, trust, joint venture, or other entity:
    • All of whose members are U.S. citizens; and
    • Each of which is capable of holding title to a vessel under U.S. or state laws.
  • A partnership whose general partners are U.S. citizens, and the controlling interest in the partnership is owned by U.S. citizens;
  • A corporation established under U.S. federal or state law, whose CEO, by whatever title, and chairman of its board of directors are U.S. citizens, and no more of its directors are noncitizens than a minority of the number necessary to constitute a quorum; or
  • the U.S. Government; or
  • the government of a state.
Q: Who can qualify to document a vessel with a fishery endorsement?
A: Individual U.S. citizens, or other business entity with at least 75% of its interest at each tier and in the aggregate owned and controlled by citizens of the U.S. can qualify as a Fishery Citizen. Depending on the structure of the business organization, additional requirements may apply.

Q: How is control defined in the Fishery Citizen context?
A: Under the vessel documentation laws, the terms "control" or "controlled" include the right to:
  1. Direct the business of the entity that owns fishing industry vessels;
  2. Limit the actions of or replace the CEO, a majority of the board of directors, any general partner, or any person serving in a management capacity of the entity that owns such vessels; or
  3. Direct the transfer, operation, or manning of such vessels.
Q: Are there any other regulations regarding noncitizen control that foreign investors should be aware of?
A: Yes, the Maritime Administration regulations divide the control factors into absolute indicia of control and indicia of control that involve distraction. If a noncitizen has any of the absolute indicia of control, the regulations will find that impressible control along with the presence of one or more of the discretionary indicia depending on whether other factors are also present.

Q: Does the Maritime Administration regulate management agreements or long-term or exclusive sales contracts?
A: Yes, it allows only management agreements that are ministerial in nature and do not convey control of the vessel. Only contracts that are solely for the purpose of employment of certain vessels on an exclusive basis for a specified period of time are permissible for noncitizens.

Q: What opportunities exist for foreign investors to participate indirectly in the fishing industry?
A: Foreign investors may enter into agreements regarding fishing permits subject to the Maritime Administration’s indicia of control. Noncitizens may also invest in shore-based processing facilities.

Q: May a foreign citizen or entity hold a preferred mortgage on a U.S. flag vessel?
A: Not usually. Holders of preferred mortgages on U.S. flag fishing industry vessels of 100 ft. or more in length must be Fishery Citizens, in a class of approved lenders, or must utilize an approved mortgage trustee. Noncitizens may hold preferred mortgages on smaller vessels but will be subject to the requirements for all documented vessels with fishery endorsements.