Question Period Note: New Inshore Regulations

New Inshore Regulations

Our government is delivering on its commitment to protect the independence of the inshore fleet and keep the economic benefits of inshore fishing licences in the hands of independent harvesters.

We have worked diligently with partners to enshrine the Owner-Operator and Fleet Separation Policies into law.

This requires that licence holders maintain control over the use of the licence and retain the benefit generated by fishing.

Supplementary
These regulatory amendments provide the clarity and tools necessary to preserve the independence of licence holders in commercial inshore fisheries.

This is accomplished by introducing enforceable requirements that if violated, could lead to both potential prosecution and the licences not being issued.

The need for a crew registry and who can be on board a fishing vessel
The Regulations continue to permit a crew-share agreement (or other catch revenue sharing arrangements) with people who are fishing aboard the vessel.
The regulatory amendments require that all Independent Core licence holders, or their DFO-approved substitute operators, record and maintain a Crew Registry, for each fishing trip, for a period of five years. This allows for the sharing of catch revenue with people who are fishing aboard the vessel.

This information will need to be documented and held by the licence holder, or their approved substitute operator, and provided to DFO upon request.

Who can be on board a fishing vessel
The people who are fishing aboard the fishing vessel need to be included in the crew registry, and in compliance with existing regulations

If they are over sixteen years of age, they are required to have a Fisher Registration Card, or a provincial fishers certificate. Children under sixteen years of age are allowed on fishing vessels without being registered.

Safety is of paramount importance, and licence holders should consider this carefully before deciding who should be on their fishing vessel for each fishing trip.

Canada Revenue Agency/Employment and Social Development Canada (Employment Insurance) access to crew registry information
The regulatory amendments require that all Independent Core licence holders, or their DFO-approved substitute operators, record and maintain a Crew Registry, for each fishing trip, for a period of five years.
DFO may, on a case-by-case basis, seek this information from licence holders to confirm the crew members who are participating in the Catch Share Agreements (i.e. an allowable form of sharing catch revenue among crew members).
This information will not be held by DFO, rather it will be held by the licence holder, or their approved substitute operator.
DFO will not provide this information directly to any other government department.

Income Splitting Rules
The new regulations allow the benefits from fishing to be shared among family members.

The regulations recognize family fishing companies and allow for the transfer of the rights and benefits under the licence to that company so long as the licence holder remains in complete control.

While some family companies might need to adjust their corporate structures and/or tax practices, licence holders will still qualify for tax benefits.

• DFO amended the Atlantic Fishery Regulations, 1985 and the Maritime Provinces Fishery Regulations to clarify the rules governing inshore licences and provide new enforceable requirements. Proposed amendments to these regulations were published in the Canada Gazette, Part I on July 6, 2019, followed by a 30-day comment period. On December 9th, 2020, the final amendments to the regulations were published in the Canada Gazette, Part II.
• Two key objectives of the inshore regulatory amendments were to ensure that the Minister’s licensing decisions are not undermined, while preserving the independence of licence holders in commercial inshore fisheries. When the Minister issues a licence to an eligible applicant, it is expected that the same individual will carry out the activities authorized under the licence, and that they benefit personally from the fishing activity.
• Some provisions in the amended regulations came into force on December 9, 2020, and others have come into force on April 1, 2021 (e.g., declaration of eligibility compliance through the National Online Licencing System at time of applying for a licence fee).
• These amendments directly address instances when another person or entity (that is typically not eligible to hold that licence, such as certain types of corporations) receives some or all of the rights and privileges associated with that licence via an agreement or arrangement with the licence holder.
• The main concerns expressed by stakeholders to date are related to the authorized corporate structures, to the crew registry requirement, and to the declaration that licence holders will need to make before paying the licence fees.
• On February 23, 2021, MP Chris D'Entremont wrote to Minister Jordan and Minister Lebouthillier regarding conflicting rules between the new coastal fisheries regulations and the split income tax legislation.
• Minister Jordan told him that “when a licensee does not control 100 per cent of the license, influence and control can be exercised to varying degrees, perceived or apparent, compromising their independence. In developing these regulations, it was important that the Ministry be clear about the intent of the regulations and to make the rules easy to understand and apply. This is the reason for the regulatory view that all voting rights, whether minority (as in the case of the 10 per cent income splitting threshold) or majority, are not allowed. "
• When crafting the regulatory exceptions authorizing the transfer of the use and control of the rights and privileges, the aim was to maintain the principle that the eligible licence holder would be the one in control of the fishing activity, actively fishing the licence, and receiving the benefits from that licence.
• Between the Canada Gazette, Part I and Canada Gazette, Part II various modifications were made to the regulatory design in order to minimize impacts on some business practices in the fishing sector, including but not limited to various forms of corporate structuring, as well as catch share agreements. All of these were scoped within the framework of maintaining the owner operator principle that the eligible fisher would be the one in control of the fishing activity, and where possible, to permit capital generation and investment through the use of the licence as collateral, without compromising the operational independence (separating the rights and privileges conferred by the licence). In the case of allowing for spousal participation in the beneficial interest of the licence, such a design would have introduced a level of complexity and oversight difficult to enforce. The regulations do allow other means by which investment and dividends structure can be exercised.
• Recently, concerns have been expressed regarding the crew registry, which requires recording of the fishing crew (using the regulatory required the fisher’s registration or provincial certificate number) for each fishing trip. Fishers under sixteen years of age are an exception under the existing regulations, and those who are not involved in the activity of fishing are not considered as part of the fishing crew.

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