3
U.S. and Foreign Experience: Lessons Learned

This chapter reviews the genesis, characteristics, and outcomes of individual fishing quota (IFQ) programs that are currently implemented in the United States and abroad. The core case studies, summaries of which are presented in the text of this chapter, discuss the federal IFQ programs currently implemented under the Magnuson-Stevens Act, selected examples of IFQ programs in other countries, and the available literature on IFQ programs worldwide (e.g., ICES, 1996, 1997; OECD, 1997). The full texts of the selected case studies and associated literature citations are presented in Appendix G.

IFQ programs reviewed by the committee are a subset of a larger set of management alternatives intended to restrict fishing participation or effort (see Chapter 4). This larger set of alternatives includes license limitation and more direct effort controls such as transferable trap certificates. Each IFQ program currently in place was adapted to the particular circumstances of the fishery or fisheries in question. The common characteristics of these programs are summarized below, according to the following categories:

  •  Prior regulatory conditions in the fishery
  •  Prior biological and ecological conditions in the fishery
  •  Prior economic and social conditions in the fishery
  •  Problems and issues that led to consideration of an IFQ program
  •  Objectives of the IFQ program
  •  IFQ program development process and the transition to IFQs
  •  The IFQ program
  •  Outcomes of the IFQ program


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--> 3 U.S. and Foreign Experience: Lessons Learned This chapter reviews the genesis, characteristics, and outcomes of individual fishing quota (IFQ) programs that are currently implemented in the United States and abroad. The core case studies, summaries of which are presented in the text of this chapter, discuss the federal IFQ programs currently implemented under the Magnuson-Stevens Act, selected examples of IFQ programs in other countries, and the available literature on IFQ programs worldwide (e.g., ICES, 1996, 1997; OECD, 1997). The full texts of the selected case studies and associated literature citations are presented in Appendix G. IFQ programs reviewed by the committee are a subset of a larger set of management alternatives intended to restrict fishing participation or effort (see Chapter 4). This larger set of alternatives includes license limitation and more direct effort controls such as transferable trap certificates. Each IFQ program currently in place was adapted to the particular circumstances of the fishery or fisheries in question. The common characteristics of these programs are summarized below, according to the following categories:  Prior regulatory conditions in the fishery  Prior biological and ecological conditions in the fishery  Prior economic and social conditions in the fishery  Problems and issues that led to consideration of an IFQ program  Objectives of the IFQ program  IFQ program development process and the transition to IFQs  The IFQ program  Outcomes of the IFQ program

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--> Surf Clam/Ocean Quahog (SCOQ) Fishery1 General Description Surf clams (Spisula solidissima) and ocean quahogs (Arctica islandica ) are bivalve mollusks that occur along the U.S. East Coast, primarily from Maine to Virginia, with commercial concentrations found off the Mid-Atlantic coast. Surf clam fishing began in the 1940s and ocean quahog fishing began in the 1970s. These two closely related fisheries are largely conducted by the same vessels, using hydraulic clam dredges. There are a small number of landing sites and processing facilities, some of which are vertically integrated in that they also own harvesting vessels. Most of the catch is shucked and processed into products such as minced clams, clam strips, juice, sauce, and chowder. In addition, a small fishery for fresh in-shell ocean quahogs in the Gulf of Maine began in the 1980s. Apart from a small bait fishery, recreational fishing is insignificant. The SCOQ fishery was the first to be managed under the Magnuson-Stevens Act and the first individual transferable quota (ITQ) program approved under the act. Prior Regulatory Conditions in the Fishery Prior to ITQs, the SCOQ fishery was managed through a combination of size limits, annual and quarterly quotas, and in the case of surf clams, fishing time restrictions intended to spread out the catch and even out product input to processors. All vessels were required to detail their catches in official logbooks. These logbooks yielded a clear record of individual vessel performance. Permits were required, but were not restricted in number or availability. Prior Biological and Ecological Conditions in the Fishery The biomass of surf clam and ocean quahog populations is dominated by a few large year classes, and year-to-year recruitment variability is high. Neither species demonstrates a statistically significant relationship between the size of the spawning stock and the number of clams recruited. Consequently, harvesters rely on a few large year classes to buffer interannual variability. Surf clams grow slowly and are long-lived, but are sedentary and thus easy to exploit when found. Surf clams were subject to heavy fishing pressure from the late 1960s to the mid-1970s, localized stocks were depleted, and the fishing fleet moved to new grounds. In 1976, a period of low dissolved oxygen killed a large portion of the surf clam stock off New Jersey, prompting tighter harvest restrictions. 1   See Appendix G for a more thorough review.

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--> Prior Economic and Social Conditions in the Fishery A moratorium on new entrants into the fishery was begun in 1977. Under the moratorium, which lasted until 1990 when the ITQ program was implemented, the number of permitted vessels remained essentially unchanged at approximately 140. Nevertheless, fleet harvesting capacity increased because of the nature of the vessel replacement policy. In addition, the number of crew members employed declined during the moratorium period as vessel owners adapted to fishing time restrictions by using the same crew members on more than one boat. Thus, the moratorium significantly affected the social and economic character of the industry. Although crew members who continued to work on clam vessels received a greater number of fishing days and higher incomes, they were less likely to see fishing as a challenge or adventure than other types of commercial fishermen, and there was a somewhat lower degree of commitment to and dependence on clam fishing compared to other types of commercial fishing. As early as 1980, a trend toward concentrated market power became evident in the processing sector, and market concentration continues to characterize the SCOQ processing sector. A few large, vertically integrated firms dominated the industry in their dealings with numerous small processors and independent vessel owners, including a few owners who themselves amassed large fleets during the moratorium. Many of the clam vessels were unionized prior to 1979 and thus captains and crew members had some union representation in their dealings with vessel owners. After that time when vessels were sold, mostly to their captains, unionization ended, and no association arose to represent the interests of captains and crews. However, both vessel owners and processors were very active in the management process, and several organizations appeared from time to time to help galvanize efforts to cooperate with the Mid-Atlantic Fishery Management Council (MAFMC). Fishing ports and processor locations for the SCOQ industry are spread throughout the Mid-Atlantic region and into New England. Processors are found in both seaport and inland communities. The processing labor force is dominated by ethnic and racial minorities and in some places is dependent on immigrants transported from inner cities. The fishing fleets move around quite a bit over time, following clams or clam buyers; hence many crew members are long-distance commuters (e.g., between New Bedford, Massachusetts, and Cape May, New Jersey). Crew members often come from the hinterlands of port communities. Thus, the Atlantic City fleet has little direct connection with Atlantic City; the owners and crew live primarily in old "baymen" towns such as Absecon and Tuckertown, New Jersey. In ports such as Cape May and Wildwood, New Jersey, where fishing is one of the very few year-round occupations, the clam fleet is part of a much larger fishing fleet embedded in a seasonal tourism economy. Occupational health and safety issues loomed large in this fishery.

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--> Vessels frequently sank and fishermen's lives were lost each year off the Mid-Atlantic coast through the late 1980s. Problems and Issues That Led to Consideration of an ITQ Program The moratorium established in 1977 was widely considered a success. In concert with other fishery regulations, it reduced the overharvest of surf clams and fostered development of the ocean quahog fishery. The regulatory system under the moratorium, however, was cumbersome and costly to enforce. The rules restricting fishing time, in particular, were complicated and led to a large “ghost fleet" of mostly unused fishing capacity and to health and safety problems resulting from the fishermen feeling that they had to fish in bad weather. Cheating in the form of ignoring regulations on time, area, and clam sizes was alleged to have been rampant. Excess capacity clearly existed in the fleet, and financial institutions were notably reluctant to support fishing ventures. Objectives of the ITQ Program The objectives of the 1977 SCOQ fishery management plan (FMP), as amended in 1987, included the following: ". . . [C]onserve and rebuild Atlantic surf clam and ocean quahog resources by stabilizing annual harvest rates throughout the management unit in a way that minimizes short-term dislocation"; "Simplify. . .the regulatory requirements of clam and quahog management to minimize the government and private cost of administering and complying. . . .'; ". . .[P]rovide the opportunity for industry to operate efficiently, consistent with the conservation of clam and quahog resources, which will bring harvesting capacity in balance with processing and biological capacity and allow industry participants to achieve economic efficiency including efficient utilization of capital resources by the industry"; and "A management regime and regulatory framework which is flexible and adaptive to unanticipated short-term events or circumstances and consistent with overall plan objectives and long-term industry planning and investment needs" (MAFMC, 1988, p. 1; MAFMC, 1996, p. 30). ITQ Program Development Process and the Transition to ITQs The 1977 moratorium was intended to be a temporary measure. Instead, it lasted for 12 years. During this period, a Plan Development Team, advised by the council's SCOQ Committee, worked though several phases of discussion regarding potential long-term management frameworks. Prominent in this period were the alternative of individual vessel allocations, which was eventually rejected,

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--> and the issue of potential industry consolidation and the development of oligopsonistic2 or monopsonistic3 systems. The final ITQ program was adopted by the council in 1989 and approved by the Secretary of Commerce in 1990. The ITQ Program The ITQ Management Units. The ITQ has two components: (1) the "quota share" expressed in percentages of the total allowable catch (TAC) that can be transferred permanently, and (2) the "allocation permit" issued in the form of cage tags4 that are valid for, and can be transferred only within, a calendar year. Annual individual quotas are calculated by multiplying the individual quota share by the TAC in bushels. Bushel allocations are then divided by 32 to yield the number of cages allotted, for which cage tags are issued. The Initial Allocation of Quota Shares. The initial allocation of quota shares was to owners of permitted vessels that harvested surf clams or ocean quahogs between January 1, 1970, and December 31, 1988. Different formulas were used for allocations of surf clams in the Mid-Atlantic region, surf clams in New England, and ocean quahogs in both regions. For Mid-Atlantic surf clams, 80% of the allocation was based on the vessel's average historic catch in the qualifying period, and 20% was based on a "cost factor" involving vessel capacity. For ocean quahogs and New England surf clams, the allocation was based solely on average catch during the qualifying years. Accumulation and Transfer of Quota Shares. The minimum holding of SCOQ ITQ shares is five cage units. There is no maximum holding or limit to accumulation, except as might be determined by U.S. antitrust law. Anyone qualified to own a fishing vessel under U.S. law is entitled to purchase SCOQ ITQs. Setting of Quotas and Other Biological Parameters. The SCOQ FMP is a framework plan that establishes an allowable range of harvest, but each year the MAFMC, in conjunction with an industry advisory panel, recommends specific TACs. Council policy is to set the quota within a specified range of optimum yield at a level that will allow fishing to continue at this level for a specified period (for surf clams, 10 years; for ocean quahogs, 30 years), "and within the 2   A market situation in which each of a few buyers exerts a disproportionate influence on the market (Merriam-Webster, Inc., 1998. The WWWebster Dictionary [Online]. [available: http://www.m-w.com/cgi-bin/dictionary] September 1, 1998). 3   An oligopsony limited to one buyer. (Merriam-Webster, Inc., 1998; The WWWebster Dictionary [Online] [available: http://www.m-w.com/cgi-bin/dictionary] September 1, 1998). 4   One tag is affixed to each cage, which is a large cubical mesh container holding 32 bushels of clams.

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--> above constraints the quota may be set taking into account economic information to set the quota to consider net economic benefits over time to consumers and producers, within the framework of greatest national benefit."5 Monitoring and Enforcement. The harvest is monitored through the cage tag requirement and vessel log and dealer reports. There is heavy emphasis on shoreside monitoring and enforcement, although some air and at-sea surveillance is also conducted. Administration and Compensation. No resource rents are collected from SCOQ ITQ fisheries. Allocation permit fees are collected to help defray administrative costs. Evaluation and Adaptation. Evaluation and adaptation take place through the FMP amendment process, as well as through reviews by the National Marine Fisheries Service (NMFS) and outside groups. After the defeat of several lawsuits filed by industry groups challenging various features of the ITQ plan, the general approach of industry appears to be acceptance and desire for consistency and predictability, as opposed to frequent change. Outcomes of the ITQ Program General. TACs have not been exceeded since implementation of the ITQ program. Natural growth of major year classes of clams and greater targeting of fishing effort subsequent to ITQ implementation led the MAFMC to suspend the minimum size limit on surf clams. The number of vessels active in the surf clam fishery in federal waters went from 128 in 1990, at the initiation of the ITQ program, to 33 in 1997, a 74% reduction. Active vessels in the ocean quahog fishery had less of a decline: from 52 in 1990 to 31 in 1997 (in 1997 14 boats were used in both fisheries; the total fleet numbered 50). Effects on employment have not been quantified, but reports suggest commensurate reductions in jobs, both at sea and on land, as well as increases in working hours at sea for crew. Biological and Ecological Outcomes for the Fishery. Considerable uncertainty and contention exist regarding the status of the SCOQ stocks and the effects of clam dredging on seafloor habitats. The ITQ program is alleged to encourage targeting and selection of clam populations that meet industry demand, that is, high catch per unit effort (CPUE), achieved by harvesting relatively large clams from relatively pure aggregations. There has been a decline in the discard of 5   MAFMC, April 1998 meeting, as reported in Memo to Surf Clam and Ocean Quahog Committee, surf clam and ocean quahog advisors, and others, July 30, 1998, p. 17.

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--> small clams under the ITQ program. Incentives for discards decreased when the council abolished minimum size limits because of data showing relatively low proportions of undersized clams. ITQs may have provided some of the incentive for more effort to find locations with large clams, although this has not been documented. Economic and Social Outcomes for the Fishery. Evaluations of the SCOQ fishery have shown that economic efficiency has increased and excess harvesting capacity has declined since the introduction of ITQs. Although some small firms were resilient in the fishery, purchasing more quota shares, many small firms sold out in the first two years after implementation of ITQs. Medium-sized firms were the most likely to purchase more quota shares, while the largest firms remained essentially constant in their holdings. Many quota share recipients ceased fishing and leased their quota shares to other firms. Ownership became increasingly concentrated for ocean quahogs but did not change significantly for surf clams. Between 1988 and 1994, market share was unrelated to price received for catch, suggesting lack of monopoly power in the seller's market. After ITQs were implemented, a few buyer-processors gained dominance, and the processing sector has begun to move to southern New England. There has been a northward shift in landings, due in part to declining CPUE off Virginia and southern New Jersey and in part to the shift in processing locations. Reliance on a single buyer increased the likelihood of exiting the fishery by the end of 1993, while reliance on multiple buyers decreased the likelihood of exiting the fishery, suggesting the power of buyers in the system. The surf clam fishery tends to have a bimodal distribution of large versus small operators, whereas the ocean quahog fishery is more evenly distributed, with a middle class of quota shareholders as well as large operators. Economic and Social Outcomes for Fishery-Dependent Communities. Employment in the clam industry has declined due to the reduction of vessels and a concomitant decline in the bargaining power of crew and captains, symbolized and to some degree exacerbated by changes in the share system of returns to owners and crew. No research has been done on the effects of ITQs on local communities. Improved safety was a major selling point for the ITQ program, given frequent losses of boats and lives prior to ITQs. Reducing the size of the fleet, removing older vessels, and replacing time limits with ITQs would remove pressures to fish in unsafe ways and conditions (McCay, 1992). However, between 1990, when ITQs went into effect, and February 1999 nine clam boats and at least fourteen lives have been lost in this fishery, a rate of loss comparable to that of the 1980s. Clearly, sea clamming remains a dangerous occupation. The role of ITQs in either mitigating or enhancing its dangers is not known.

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--> Administrative Outcomes. Enforcement was problematic at the beginning of the program, although problems were mitigated somewhat by the cage tag, logbook, and dealer reporting systems. The issue of monitoring of concentration of ownership has been particularly problematic for two reasons. First, it is practically impossible to ascertain the exact identity of "owning persons" due to the nature of the record-keeping process. Second, the critical term "excessive share" is not defined in the Magnuson-Stevens Act or the SCOQ FMP, and thus far courts have not given attention to the issue of concentration unless it approaches monopoly levels, which does not appear to be the case in the SCOQ fishery. Current Perceived Issues. The major current issues relating to the SCOQ ITQ program are (1) concern with the security of the program, given the recent attempts by Congress to hinder the existence of such programs; (2) perceived inadequacies in the stock assessment and economic studies used in the quota-setting process; (3) adequate enforcement in both state and federal waters; (4) concentration of quota share, even though it may be short of the official definition of "monopoly"; and (5) the need for a lien registry to improve lender confidence so that ITQs can better function as collateral. South Atlantic Wreckfish Fishery6 The fishery for wreckfish (Polyprion americanus) takes place in a relatively small area of the U.S. South Atlantic region, in deepwater, using specialized gear. The product is sold in specialized market niches. The number of participants is small (<50), and the fishery was put under an IFQ program within five years of its inception. Prior Regulatory Conditions in the Fishery The fishery began in 1987 and was regulated by the South Atlantic Fishery Management Council (SAFMC) under the council's Snapper-Grouper FMP beginning in 1990. Prior to implementation of the ITQ program in 1992, the wreckfish fishery was regulated through a TAC, trip limits, a permit system, a spawning closure, restricted offloading hours, and a bottom longline restriction. A control date for establishing eligibility for potential limited entry was established in 1990. Prior Biological and Ecological Conditions in the Fishery Catch in the wreckfish fishery increased from 29,000 pounds in 1987 to more 6   Unless otherwise noted, the information in this synopsis is from SAFMC (1991).

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--> than 4,000,000 pounds in 1990. Little was (or is) known about the biology of wreckfish or the dynamics of wreckfish populations due to the newness of the fishery and the lack of research and reliable stock assessments. Prior Economic and Social Conditions in the Fishery The number of vessels in the fishery increased from 2 in 1987 (prior to permits) to 80 permitted vessels in 1991. Most of the vessels were larger than 50 feet in length, had hold capacities of 5,000-20,000 pounds, and were used primarily in other fisheries, such as snapper, grouper, or shrimp. The fishery takes place far offshore (120 miles) compared to most other South Atlantic fisheries, and involves fiveto eight-day trips (SAFMC, 1991). Wreckfish is a market substitute for snapper and grouper. Some economic analysis has been done on the fishery and individual fishing operation characteristics, but no sociological analysis has been conducted. The relatively small number of participants in the wreckfish fishery come from a large and widely dispersed number of fisheries and communities throughout the South Atlantic region (primarily Florida to North Carolina). There is no discernible community that is significantly dependent on the wreckfish fishery. Problems and Issues That Led to Consideration of an ITQ Program The most important factor in the decision to consider an ITQ program for wreckfish was the rapid rise in both catch (29,000 to 4,000,000 pounds) and participation (2 to 80 vessels) in a short period of time (1987-1991); wreckfish are known to be long-lived, but information about the population dynamics and life history of this species is lacking. The rapid development of fishing capacity was already leading to shortening of the season due to a "derby" fishery. The development of the wreckfish fishery was viewed by the SAFMC as an opportunity to "rationalize" a fishery at its early stages. Objectives of the ITQ Program The ITQ program has a number of important objectives:  To develop a mechanism to vest fishermen in the wreckfish fishery and create incentives for conservation and regulatory compliance whereby fishermen can realize potential long-run benefits from efforts to conserve and manage the wreckfish resource.  To provide a management regime that promotes stability and facilitates long-range planning and investment by harvesters and fish dealers while avoiding, where possible, the necessity for more stringent management measures and increasing management costs over time.

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-->  To develop a mechanism that allows the marketplace to drive harvest strategies and product forms to maintain product continuity and increase total producer and consumer benefits from the fishery.  To promote management regimes that minimize gear and area conflicts among fishermen.  To minimize the tendency for overcapitalization in the harvesting and processing-distribution sectors.  To provide a reasonable opportunity for fishermen to make adequate returns from commercial fishing by controlling entry so that returns are not regularly dissipated by open access, while also providing avenues for fishermen not initially included in the limited entry program to enter the program. ITQ Program Development Process and the Transition to ITQs Development of the ITQ program occurred within the council process, as an amendment to the Snapper-Grouper FMP. Scoping and other meetings and workshops involved industry in developing the program and amending it. Economic analyses were performed on optimal fleet size and individual vessel economics and those data were used in the development of the IFQ program. The ITQ Program ITQ Management Units. The management units are percentage shares in the TAC each year. Specific poundages are calculated annually based on the TAC, and coupons are issued in the amount of this poundage to ITQ holders. Initial Allocation of Quota Shares. Eligibility to receive initial ITQ shares was restricted to permittees who landed more than 5,000 pounds of wreckfish in either 1989 or 1990. Fifty percent of the shares were distributed in proportion to a permittee's landings in 1987-1990; the other 50 percent was distributed equally to all eligible permittees. No "single business entity" could receive more than 10% of initial shares. Accumulation and Transfer of Quota Shares. There is no limit on accumulation of ITQ or coupon shares by permittees. Wreckfish ITQ shares are freely transferable; yearly quotas (coupons) are transferable separately, but only among permittees. Monitoring and Enforcement. Monitoring is conducted by the SAFMC and NMFS; enforcement is by NMFS and the Coast Guard. Dealers must hold permits to buy wreckfish.

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--> Administration and Compensation. The wreckfish ITQ program is administered by NMFS and the SAFMC. Evaluation and Adaptation. Biological and economic parameters are evaluated each year by NMFS and the SAFMC. The program has not been changed since it was implemented and the TAC has remained constant. Outcomes of the ITQ Program Biological and Ecological Outcomes for the Fishery. Biological characteristics of landed fish have remained relatively constant and the TAC has remained constant. Landings have been significantly lower than the TAC every year since the inception of the ITQ program; in 1996, only 396,868 pounds were landed out of a total TAC of 2,000,000 pounds. This is due principally to a reduction in fishing trips. Underharvest of the TAC appears to be due primarily to low market prices of wreckfish compared to other species for which the same vessels can fish. Economic and Social Outcomes for the Fishery. The number of ITQ shareholders has decreased from 49 in 1992 to 25 in 1996, only 8 of which landed wreckfish in the 1996-1997 season (April to April). Thus, shareholders are truly "holding" ITQ shares and coupons; most are engaged in other fisheries. The price for wreckfish has increased somewhat since the ITQ program went into effect, but no analysis has been done regarding the relationship between the ITQ program and exvessel price for wreckfish. Economic and Social Outcomes for Fishery-Dependent Communities. Effort from the wreckfish fishery appears to have transferred into other fisheries in the South Atlantic region, particularly into the snapper-grouper and shrimp fisheries, fisheries from which the wreckfish fishermen came in the recent past. As mentioned earlier, the fishermen are based in a dispersed set of communities in the South Atlantic region, so the impact of the ITQ program on communities is difficult to discern. Presumably some flexibility has been lost for other, non-ITQ fishermen who might wish to fish for the unused portion of the quota. The other perspective is that these fish are being "banked" by quota holders and they or their offspring could be caught in later years. Administrative Outcomes. The program is relatively small (25 ITQ holders), and much easier to administer, enforce, and monitor than the fishery management system in place prior to the ITQ program. The Magnuson-Stevens Act mandates the recovery of up to 3% of the costs for the administration and enforcement of IFQ programs, but NMFS and the SAFMC have not yet begun planning a cost recovery system for wreckfish. It is reported that the pressure to increase the TAC that existed before ITQs has disappeared.

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--> BOX 3.1 Effect of IFQs on Fleet Capacity The Netherlands. ITQs have been used in fisheries management in The Netherlands since 1976. The development of fleet capacity and effort since enforcement was tightened is consistent with the effect expected from effective ITQ management. The number of vessels declined from 533 in 1990 to 437 in 1996, and total engine capacity (1,000 units of horsepower) from 544 in 1990 to 467 in 1996 (Smit et al., 1997). It is difficult to ascribe this effect to the workings of the ITQ program alone because other management measures have also been in place, such as licensing of capacity (horsepower) and limits on the number of days at sea. Some of the decline in capacity and effort is due to a stricter enforcement of these measures. Norway. Figure 3.2 shows the number of licensed vessels and the aggregate licensed cargo capacity of the purse seine fleet in Norway. In the early 1970s, a limited entry system was instituted in the Norwegian purse seine fleet for vessels of more than 1,500-hectoliter hold capacity or longer than 90 feet. Individual vessel quota (IVQs) were introduced also, with the quota allocation of each vessel being determined by the licensed hold capacity through a formula that gave relatively smaller quotas to the larger vessels. Because of economies of scale in the fleet, there was a development toward fewer, larger vessels. In the beginning the total licensed capacity actually increased, due to liberal practice of the rules of capacity replacement when old vessels were replaced by new ones. The reduction in total fleet capacity in the 1980s was due, at least in part, to a buyback program financed by the government. Iceland. Whether or not IFQs have reduced the excessive capacity of the fleet in the IFQ fisheries is still an open question. The size of the entire Icelandic fishing fleet in terms of gross register tons has increased slightly since 1990, the year when quotas became long-term and could be expected to have an impact on fleet size. However, some of the increase in capacity may be due to increased distant water fishing, which requires large vessels suitable for long trips. implemented, and no lives were lost between 1992 and 1998; however, the sinking of four vessels in early 1999 resulted in the deaths of 10 fishermen.  Decreases in total harvest-sector employment have been documented in some IFQ fisheries, primarily as a result of decreased numbers of vessels participating and secondarily as a result of less intensive demand for labor compared to "derby" fisheries. However, the length of employment has increased for those who remain employed in some fisheries (e.g., in the Canadian Pacific groundfish fisheries: Bruce Turris, presentation to the committee). A common perception is that "power" (bargaining for prices or employment; influence over the management structure; economic influence in communities)

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--> Figure 3.2  Number of license purse seiners and total fleet capacity in Norway. BOX 3.2 Shift in Vessel Size in Icelandic ITQ Fisheries In the Icelandic case, there has been a significant change in the distribution of quota among vessel size classes from the onset of the ITQ program. Many vessel owners have been dropped out of the program, and a large majority of these were the smallest operators. At the same time, quotas are becoming concentrated in the hands of fewer vessel owners and companies (Figure 3.3; see Appendix G for additional details). Many Icelanders are wary of the rapid concentration of ITQs in the hands of large vertically integrated companies. A committee appointed by the Ministry of Fisheries recommended that a ceiling for any single quota holder be fixed by law. The Icelandic Parliament decided to set the limit at 10% for cod and haddock and 20% for other species.

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--> FIGURE 3.3 Changes in holdings of quota share by size of quota holding. has shifted in many IFQ-managed fisheries. This is usually attributed both to the generation and ownership of new economic value reflected in IFQs and to the fact that ownership of originally issued IFQs is generally concentrated among vessel owners, rather than the crew or processing sectors. Concern exists in many IFQ-managed fisheries that certain interest groups or communities will become winners or losers due to the shifts in ownership or control of IFQs over time. Thus, some communities fear the loss of an economic base through the exit of IFQs from the community, and some commercial fishermen fear eventual control of IFQs by environmental or recreational interests. Neither of these outcomes has been documented to date, although some IFQ TABLE 3.3 Search and Rescue Statistics from Alaskan IFQ Fisheries Year No. of Search and Rescue Cases Mortalities 1992 24 5 1993 26 0 1994 33 1 (IFQs Implemented)     1995 15 0 1996 7 2 1997 9 1   SOURCE: U.S. Coast Guard.

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--> BOX 3.3 Limitations on Interregional Transfers in Norwegian Individual Vessel Quota (IVQ) Programs In 1996, a new Norwegian regulation allowed a person who buys a licensed vessel and scraps it to retain a part of the quota allocation of that vessel for 13 years. How large a part an individual is allowed to retain depends on whether the vessel is being sold from the northern part of the country to the southern part, vice versa, or within each of these areas: Direction of Sale % Quota Retained Northern to southern Norway 50 Within southern Norway 75 Within northern Norway 95 Southern to northern Norway 95 This policy was implemented because most purse seiners previously located in northern Norway have been sold to operators in the southern part of the country, a trend that the government is trying to reverse. The part of the quota that the buyer of a vessel looses is divided among all the licensed vessels in the fleet. programs have been designed to discourage transfer of quota shares among regions (Box 3.3). Few community-based organizations (e.g., municipalities, cooperatives, development associations) have taken the opportunity to serve as lenders for the purchase of IFQs by individuals, although some of the Bering Sea Community Development Quota groups have done so. IFQs may be used as collateral at commercial lending institutions in some programs, but this option is weakened in the United States by a delay in the implementation of a lien registry.  Several of the programs reviewed showed clear evidence of the aggregation of IFQs subsequent to the initiation of the program (e.g., surf clams, ocean quahogs). However, other programs, particularly those that had been designed with provisions intended to prevent aggregation, did not show evidence of aggregation beyond the design parameters of the program (e.g., halibut, sablefish). Thus, aggregation appears to have occurred in those programs that were not designed to prevent it, and not to have occurred in those that were designed to prevent it. Lessons Learned The following are the general lessons that can be drawn from the above cases and summaries and from the more complete descriptions in Appendix G.

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--> Social, Economic, and Management Issues  IFQs have had different effects in different fisheries. Within the broad category of "limited entry or access," IFQs are directed toward different objectives and have different effects from other limited entry or access approaches. For example, under IFQs the number of fishing units or participants may vary; under a license limitation program there are generally a fixed number of licenses (if licenses are not transferable). Neither IFQs nor limited entry directly controls fishing effort, although they may create incentives for changes in the amount or distribution of fishing effort.  Setting clear objectives that are specifically related to the potential effects of IFQ programs is critical. Confusion often exists regarding the mix of biological versus social or economic objectives in the implementation of IFQ programs. The implementation of IFQ programs clearly has the potential to alter, and in some cases the demonstrated record of altering, (1) the distribution of costs and benefits within the fishing community and (2) the management structure. These actual or potential effects may achieve or conflict with the goals and objectives of the Magnuson-Stevens Act and other applicable law.  The success of IFQ programs in fulfilling their objectives depends on other provisions of the fishing policy and management program. For example, if the TAC is set too high, the program may fail to meet its biologic objectives, and therefore many of the economic and social objectives also. All policy and management, in fisheries or any other sector, involves trade-offs. Achieving the goals of increased overall economic efficiency, more effective enforcement or administration, or more effective conservation through the use of IFQs may lead to reduced breadth of participation by fishermen, reduced total employment in the harvesting sector, and other shifts in the distribution of benefits from the fishery. The critical point is that these trade-offs be clearly identified, estimated prior to decisionmaking, and monitored subsequent to program implementation to provide information for adjusting the program over time and for designing subsequent programs.  For a variety of reasons—from adequate design to increased acceptance of resulting programs—broad involvement of constituents in all phases of program design and implementation is critical. Stewardship and Biological Conservation Issues IFQs are not primarily a biological conservation tool; the TAC and other management measures are the main conservation tools in IFQ-managed fisheries. However, IFQs may benefit the resource by addressing either biological conservation or stewardship objectives. Biological conservation can result indirectly from changes in the behavior of fishermen who improve the efficiency of their fishing operations. The effects are largely second-order ones that follow from

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--> IFQ management, such as decreased ghost fishing, decreased bycatch due to improved selection for target species or marketable sizes, and decreased TAC overruns. These behavioral changes usually result from actions on the part of individual quota holders rather than collective actions on the part of all quota holders. Moreover, it is likely that the immediate biological conservation effects of an IFQ program will not necessarily be an indication of the long-term effects (e.g., increased fish size or recruitment); some of the effects may not be measurable for several years (Gilroy et al., 1996; see also Appendix H). Stewardship. Stewardship objectives are addressed by the direct actions taken by IFQ holders to promote the health of the fisheries resource and the wider ecosystem supporting the resource. In theory, IFQs provide collective incentives for quota holders to undertake actions such as directly funding research to determine biomass and sustainable yields, decreasing bycatch, reducing the effects of fishing on the environment, or voluntarily accepting TAC reductions to promote conservation of the resource because these actions increase the value of the quota and the potential for increased TACs in future years. These incentives may be stronger with fewer quota holders and the incentive for stewardship may be related directly to the strength of property rights, particularly the length of quota tenure. Alternatively, as mentioned in Chapter 1, stewardship may not be improved by IFQ programs, because like other forms of fisheries management, any individual fisherman reaps the full benefits of illegal actions and the much smaller average costs of the same action. In Nova Scotia, ITQ holders cooperated with government officials to develop improved conservation measures for their fishery; however, official and anecdotal reports of highgrading and data fouling continued (McCay et al., 1998). Only limited experience is available regarding whether such theoretical results occur in practice. In a few fisheries in New Zealand, quota holders have formed companies that directly fund research to determine biomass and sustainable yields, to conduct fisheries enhancement projects, and to promote voluntary TAC reductions to enhance conservation of the resource. Likewise, wreckfish IFQ holders have underfished the TAC significantly since implementation of the wreckfish IFQ program. However, the committee also received testimony that IFQs do not promote stewardship. Biological Conservation. Excess harvesting capacity is a fundamental problem with respect to conservation of fishery resources, and biological conservation is an expressed objective of most IFQ programs. Insofar as an IFQ program contributes to reduction in harvest capacity such that directed effort and catches (fishing mortalities) are reduced and/or the fishery is constrained to its TAC, conservation benefits may be real. In New Zealand, the majority of quota holders perceive biological conservation to be the greatest benefit of their IFQ program (Dewees, 1989; Boyd and Dewees, 1992). In Nova Scotia, McCay et al. (1995, 1998) found evidence of collective efforts to improve conservation through adoption of gear changes and closed areas to protect undersized and spawning fish.

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--> If single-species management, the current practice, is indeed the most effective way to prevent overfishing, IFQ programs as a means to control harvest capacity may promote conservation. Although there is limited experience with the application of IFQs to multispecies fisheries, early experience from New Zealand and British Columbia indicates that appropriately structured IFQs can be an effective management tool for multispecies fisheries (Squires et al., 1998). In actuality, the TAC, combined with size limits, gear restrictions, protection of spawning areas, and other measures, is the primary conservation measure for many exploited fish species. Thus, biological conservation is best achieved by monitoring, enforcement, compliance, and acceptance of stock assessment findings and the management process. Insofar as an IFQ program contributes to the efficacy of any of the above, real biological conservation benefits may result. The following specific issues have bearing on the efficacy of IFQ programs as conservation measures and have been identified in the refereed literature and public testimony to the committee. Derby Fishing (the race for fish). IFQ programs have been effective in eliminating the derby nature of fisheries to which they have been applied, thereby decreasing directed effort, stabilizing the supply of fish, and decreasing the potential for quota overruns attributable to the difficulty of monitoring catches during short, frantic fishing seasons. On the other hand, some public testimony, especially by those involved in enforcement, has cautioned that a slower pace and prolonged fishing season place an increased burden on those responsible for monitoring and enforcement, thus making it more difficult to prevent quota overruns. It simply becomes much more difficult to know who should and should not be fishing at any given time and place, increasing the potential for “cheating," especially if exvessel prices are high. This makes at-sea enforcement costs higher for some IFQ programs than under a derby (e.g., halibut and sablefish; see Appendix H). Data Collection and Data Fouling (underreporting catches, falsifying effort and location data, and making honest mistakes). With the implementation of an IFQ program, the nature of how fish are landed, with respect to both time and space, may change dramatically, thus changing how landings must be monitored. Cheating and data fouling can make the TAC-setting process even more difficult. Empirical evidence from New Zealand indicates that deliberate underreporting of catches (quota busting) has not increased since implementation of IFQ management, although accurate estimates of fishing effort have been more difficult to obtain because of major changes in fishing operations (Boyd and Dewees, 1992). Similarly, quota busting appears to be minimal in the IFQ-managed Alaska halibut fishery (Gilroy et al., 1996). Some evidence suggests, however, substantial underreporting of total sablefish catches in some years, which may be attributable in part to poor estimates of discarded catch (Gilroy et al., 1996). In New Zealand (Dewees, 1989; Boyd and Dewees, 1992; Annala, 1996) and in the Australian southeast trawl fishery (Squires et al., 1995), the

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--> primary resource-related problem identified with IFQ management is the high rate of discarding. This includes both discarding of bycatch for which fishermen do not possess quota (see discussion below) and highgrading to ensure that only the highest-priced portion of the catch is landed and counted against quota. However, fishermen encouraged by high-profile enforcement have learned to modify fishing operations to reduce the amount of illegal discarding as time has progressed (Annala, 1996). Bycatch and Ghost Fishing. Elimination of the race for fish may provide time for fishermen to search for lower-bycatch fishing grounds (e.g., halibut bycatch in the groundfish fishery in Pacific Canada) and to better care for bycatch species while on deck, thereby decreasing discard mortality. Nevertheless, as Squires et al. (1998) asserted, managing fisheries where several species are caught jointly is especially difficult—part of the mix is likely to be overfished and excessive discards of bycatch can occur. In New Zealand, IFQs are used in multispecies fisheries and lessons learned there suggest that this form of management can work if sufficient flexibility exists for balancing catches after the fact by acquiring additional quota holdings for bycaught species by the end of some specified time period (Boyd and Dewees, 1992). However, matching the mix of quota held to catches remains a real problem, and excessive bycatch has proven to be a difficulty in certain New Zealand fisheries. In addition, in contrast to U.S. fisheries, in the New Zealand quota management system fishing can continue in multispecies fisheries when either the IFQ or the TAC of a particular species has been filled, if the quota of other associated species has not been caught (Annala, 1996). Thus, many of the overruns in New Zealand TACs have resulted from bycatch in multispecies fisheries (Boyd and Dewees, 1992; Annala, 1996). However, fishermen appear to be adjusting their operations as time passes such that fewer overruns have occurred in recent years (Annala, 1996). Gilroy et al. (1996) estimated that fishing mortality from lost and abandoned gear decreased by 77% in the first year of halibut IFQs. Bycatch discards of halibut in sablefish fisheries decreased by 83%. Highgrading. In the absence of derby fishing, the incentive for highgrading may be increased as fishermen hunt for fish of the most marketable size and species, but more time for better treatment of discards while on deck may decrease discard mortality of fish caught with some gear types (but not trawls). Empirical evidence from the Alaskan halibut and sablefish fisheries following implementation of the IFQ program indicates that highgrading is not significant in these fisheries (Gilroy et al., 1996; see Appendix G). Indeed, the generalization that highgrading in unlikely to be profitable can be demonstrated (Box 3.4). There is theoretical evidence that the occurrence of highgrading will depend on the unique conditions in each fishery (Anderson, 1994). Empirical evidence for highgrading in other IFQ-managed fisheries (including some state programs) is mixed. Data from Wisconsin lake trout and Ontario walleye fisheries indicate serious highgrading (Wisconsin lake trout IFQs are

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--> BOX 3.4 The High Cost of Highgrading What's to keep fishermen from highgrading—throwing back all their smaller halibut or sablefish in hopes of catching bigger fish—under an IFQ program? British Columbia IVQ fishermen say they can't afford to highgrade halibut. They plan deliveries, aim for maximum efficiency, and don't want to increase operating costs by highgrading. What's the bottom line on highgrading? Figured at September 1991 prices, highgrading would increase a fisherman's revenue by 3.7%, but he or she would have to catch 24.4% more fish to make up for the discards. The IPHC sampled a delivery of 2,537 legal-sized halibut totaling 74.514 pounds. They found 38.47% of the fish (19.65% by weight) were 10-20 pound halibut. A fisherman could discard those 14,639 pounds of 10- to 20-pound halibut and try again, but would have to catch 18,217 more pounds of halibut—620 additional fish—to make sure to land at least 14,514 pounds of fish larger than 20 pounds. The additional catch would earn $5,300 more, but would rack up excess operating expenses. In other words, you would forego $30.058 in revenues from the fish discarded to earn an additional $5,300 (see below). The table shows how much more fish a harvester would have to catch to make up for highgrading, and the minimal revenue that highgrading would produce. Results would be similar for sablefish. Sept. '91     No highgrading   Highgrading: discard 10-20s Size $/lb. Lbs. Caught Revenue Lbs. Caught Revenue 10-20 lbs. $1.65 14,639 $24,153.64 18,217 $0.00 20-40 lbs. $1.65 28,370 $46,811.31 35,307 $58,255.98 40-60 lbs. $2.35 11,008 $25,869.02 13,699 $32,193.62 60-80 lbs. $2.35 10.663 $25,059.13 13,271 $31,185.72 80-100 lbs. $2.35 5,295 $12,442.71 6,589 $15,484.77 100+ lbs. $2.35 4,538 $10,664.91 5,648 $13,272.33 Total catch & revenue 74,515 $145,000.72 92,731 $150,392.41   Increase in catch & revenue   0.0% 0.0% 24.4% 3.7%   SOURCE NPFMC (1992). expressed in numbers of fish), but it appears to be minimal in the Gulf of St. Lawrence trawl, Australian bluefin tuna, and San Francisco Bay herring roe fisheries (Squires et al., 1995). Fisheries in which highgrading is not a serious problem seem to be characterized by minimal price differentials among fish sizes and/or relatively high costs of catching replacement fish (Squires et al., 1995). Discarding of small and immature fish during fishing operations and

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--> highgrading of the catch seem to continue to be a serious problem in the Icelandic fishery, and the problems may have escalated with IFQs. Since quotas are fixed and excessive catch is a violation of the law and subject to prosecution, a quota holder tends to land only the portion of the catch that generates the highest income. It is difficult to estimate the scale of such practices, but the Icelandic Parliament expressed grave concerns and passed strict laws on the treatment of fishing catches in June 1996. Concerns about highgrading, quota busting, and discards are most prominent in fisheries that lack onboard observers. If IFQ-managed fisheries develop bycatch discard problems, it may be necessary to implement or expand observer programs for these fisheries. Stock Assessment and TAC Setting. Accurate and timely stock assessments to set TACs are an integral part of most IFQ programs because IFQs represent a privilege to harvest part of the TAC. An IFQ program may affect data quality and data collection programs used to set TACs and assess the stocks (Squires et al., 1995). For example, IFQ programs can affect stock assessments due to changes in fishing behavior (Squires et al., 1995). Shifts in fishing location or seasonal patterns may alter catch rates and indices of stock abundance derived from CPUE; there may be changes in the selectivity for different sizes of fish that alter the maximum sustainable yield and the target rates of exploitation on which the TACs are based. TAC setting is invariably a somewhat unpredictable process; these uncertainties affect the expectations of fishermen in their decisions about involvement in IFQ and other limited entry programs. Underfishing TACs. Clark (1985b) presents a theoretical model that predicts the level that catches will underrun the TAC when managed under an IFQ program. Copes (1986) argued that IFQs hamper reaching the TAC because fishermen are punished for catching more than their quotas. In New Zealand, many TACs have been substantially underfished, even when very large catch reductions were imposed at the time IFQs were introduced (Boyd and Dewees, 1992). The precise reasons for underfishing are unknown, but Boyd and Dewees (1992) suggest that quota busting has been substantially reduced and that fishermen are undercatching many species (especially in multispecies fisheries) because of the limiting effect of possessing sufficient IFQs for other species in their catch mix. Thus, many fish stocks are probably benefiting from lower catch rates, resulting in faster rebuilding of some stocks that were formerly overfished (Boyd and Dewees, 1992; Annala, 1996). Similar reductions in landings of Alaska halibut (a 10% decrease) occurred immediately following the implementation of the halibut IFQ program (Gilroy et al., 1996; Knapp, 1997a, b), but landings have since increased to within a few percentage of the TAC (see Figure G.4). In the wreckfish IFQ program, the TAC has been so substantially underfished that some other factor must be operating. For example, wreckfish fishermen may be maximizing their profit by limiting the supply of wreckfish sold to certain amounts or certain times of the year.

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--> Given this analysis of the strengths and weaknesses of IFQs, what alternative measures might be used to supplement, complement, or perhaps even replace IFQs? The following chapter discusses the range of fishery management measures that have been used to try to sustain marine fisheries.