U.S. Fish Harvesters Up on Financial Rocks

By Donald Sutherland
WASHINGTON, DC, April 25, 2000 (ENS)

The American fish harvesting industry is going broke nationwide due to overfishing, loss of fish habitat, over capitalization, and government mismanagement, commercial fishing organizations and environmentalists agree. Government agencies responsible for the industry say they cannot prove it is not already financially insolvent.

"Most of the U.S. fisheries stocks are facing a disaster due to over capitalization of the fishing industry and the mismanagement practices of U.S. Department of Commerce's National Marine Fisheries Service (NMFS) and their appointed regional fishery management councils," says Zeke Grader Jr., executive director of the Pacific Coast Federation of Fishermen's Associations, the largest active trade association of commercial fishermen on the west coast of the United States.

The American fishing industry is a $25 billion wholesale business which employs 300,000 people, and had over $3 billion in landing revenues for 1998, according to U.S. Department of Commerce figures. But the Commerce Department is unable to say if the harvesting industry is broke because the Magnuson-Stevens Act provides confidentiality for financial disclosures by vessel operators and processing businesses.

By catch, the U.S. is the world's fifth largest fishing nation, harvesting 10 billion pounds annually and is the world's third largest seafood exporter with exports valued at over $2.3 billion for 1998.

But that financial picture may not be rosy much longer, Grader warns. "We are very close to total closure in most of our fisheries industries because we have an industry reliant on a national resource going to hell under the management of biologists and bureaucrats operating without a long term business plan." "The fish harvesting industry in the U.S. isn't run like a business, and you can't prove the U.S. fish harvesting industry is financially solvent," says Grader.

"Nobody does financial solvency reporting for the U.S. fisheries harvesting industries," says Richard E. Gutting Jr., president of the National Fisheries Institute, a not-for-profit trade association representing the fish industries in the United States.

"It is the government's obligation to analyze the economic impact of fishing activities and typically that is done on an ad hoc basis," says Gutting.

Currently, Congress is reviewing the legislation that governs the management of the U.S. fishing industry in the process of reauthorizing the 1996 Magnuson-Stevens Conservation and Management Act. But lawmakers are operating without the financial data to judge the solvency of the fish harvesting industry.

The Government Accounting Office (GAO), the investigative arm of Congress, on April 6 released its latest review of the U.S. fishing industry and the economic impact of the Magnuson-Stevens Act as required under the 1996 Regulatory Flexibility Act and National Standard 8. But the GAO did not do a financial analysis of the fish harvesting industry.

The authors of the GAO report say Congress has not asked them to review the financial solvency of the fish industry.

"We are not reviewing the financial solvency of the fish harvesting industry and Congress hasn't asked us to look at the financial aspects of the fishing agency," says Jill Berman, senior evaluator at GAO's Office of Energy, Resources, and Science Issues.

"We can't get financial records due to provisions in the Magnuson-Stevens Act because disclosure of financial profit and loss information is considered proprietary," Berman explains.

Commercial fish harvesting is the last wild animal industry in the United States. Government, industry, and environmental officials say the overfishing, habitat destruction, and stock depletion in the U.S. is following a similar pattern of collapse that occurred in the Canadian fish industry in the 1990s.

The Marine Fish Conservation Network, a coalition of 90 environmental groups, fishing associations, and marine scientists, issued a wake up call in its March report "Lost at Sea." The report alleges that the NMFS has been approving fishery management plans which do not abide by the conservation measures mandated under the Sustainable Fisheries Act (SFA) of 1996.

Since 1994, U.S. taxpayers have paid more than $160 million to mitigate economic and ecological impacts of fishery management failures in New England, Alaska, and the West Coast, the Marine Fish Conservation Network report found.

The report also says Congress is considering another $421 million in federal disaster relief for the thousands of fishermen affected by recent crab, salmon, and groundfish stock collapses in these same regions.

"There's a very good reason why the fish harvesting industry doesn't provide the public transparency of its financial solvency," says Mark Powell, Pacific fisheries manager for the Center for Marine Conservation, a not-for-profit organization based in Washington, DC and a member of the National Fish Conservation Network.

"The industry is suffering from serial depletion with harvesters going from species to species in each fishery without concern for renewable stocks," says Powell.

"The businesses harvesting fish are the same group regulating the industry, and they don't want the public to know they are operating without a viable business plan," he says.

Wall Street and U.S. commodities analysts say there is no public investment in the fish industry - with the exception of shrimp - due to the volatility in fish stocks and lack of financial transparency of operation.

"The fish industry is hard to review because it is made up of thousands of little businesses instead of major publicly traded companies," says John Pappalardo, a commercial fisherman and a director at the Cape Cod Commercial Hook Fishermen's Association.

"The businesses often use a lot of smoke and mirrors tactics when it comes to financial reporting, and a lot of cashed based revenues go unreported," Pappalardo says.

Responding to declining fish stocks and overfishing, the National Marine Fisheries Service and its eight regional councils - New England, Mid-Atlantic, South Atlantic, Caribbean, Gulf, Pacific, North Pacific, and Western Pacific - have taken some actions as outlined in the agency's strategic plan.

The NMFS has implemented fishery management plans, bought fishing vessels and taken them off the water to reduce the size of the fishing fleet, limited fishing seasons, closed fish grounds, and imposed catch quotas on stressed species.

Despite these measures taken by NMFS, commercial fishing officials and environmentalists claim too many boats are still overfishing. The destruction of essential fish habitat by trawling gear scraping along the ocean floor has resulted in the sharp reductions in groundfish landings and corresponding reductions of revenue in all eight U.S. regional fishing councils.

National Marine Fisheries Service and regional council officials say the lack of basic financial data makes it difficult to demonstrate the effect of management measures on the industry and its private companies.

"We are just moving into a crisis phase in our region with landings declining five years in a row," says Steve Freese, regional economist for the northwest regional office of NMFS.

"Right now we are only operating on theory, catch and vessel revenue data," he admits.

Chris Kellogg, chief technical officer for the New England Fishery Management Council says, "On average, my guess is the fishing harvesting industry here in New England is basically covering costs and just on the boarder of solvency and insolvency." A spokesman for the West Coast Seafood Processors Association does not think the public should have access to the financial solvency of the fish harvesting and processing industries because of present federal and state laws governing confidentiality of proprietary data.

"The public can't review the financial solvency of the fisheries industry anymore than I as a member of the public can review your personal financial situation," says Rod Moore, executive director of the West Coast Seafood Processors Association.

The financial data that is made available to the public by the government shows an industry in distress and near collapse.

In January, Commerce Secretary William Daley declared the west coast groundfishing industry a disaster with loses of $11 million in revenues. Daley blamed only climate change for the reduced groundfish populations.

New England fisheries have received over $23 million in federal aid and are under strict quota restrictions for groundfishing and scallop fisheries. Large portions of the Gulf of Maine and the Georges Bank off the Atlantic coast are closed.

The North Pacific crab industry has collapsed, and an 80 percent catch reduction has been imposed. This fishery is now looking for $100 million in federal assistance.

Standard and Poors reviewing American Seafood Group LLC, one of the largest companies in the North Pacific fisheries, reported the company had absorbed $236 million in debt.

A recent 18 month study conducted by the Texas Parks and Wildlife Department shows shrimp stocks in the Gulf of Mexico have dwindled to 30 percent of their historic levels and may soon reach a point where reproduction will not be able to replenish stocks.

With the possible exception of sardines, officials at the National Marine Fisheries Service say there are not any fish stocks in the United States managed under federal fishing management plans operating at maximum sustainable yields. It is this category in the Magnuson-Stevens Act used to establish Long Term Potential Yields and catch quotas.

In October 1999 the National Marine Fisheries Service prepared a report to Congress, "Status of Fisheries of the United States." The agency listed 98 species as overfished, 127 species as not overfished, five species considered "approaching an overfished condition."

For 674 fish species, 75 percent, the agency says it does not know whether or not they are overfished.

The accuracy of the science NMFS uses to assess whether or not a fish population is "overfished" is questioned by environmentalists and commercial fish officials alike.

As an example, they cite the agency's inability to identify a critically threatened fishery in its 1998 "Status of Fisheries of the United States" report to Congress. A year later the Department of Commerce declared the Pacific groundfish industry a disaster. Yet in the 1998 report to Congress the vast majority of groundfish in the Pacific council's jurisdiction were identified as "not overfished," "not approaching an overfished condition," or "unknown."

"The NMFS has had no leadership under any administration or party, and since the '70s all they have set out to do is build up the U.S. fishing fleet only to buy it back because of over capitalization without any idea of how much fish is out there," says Grader of the Pacific Coast Federation of Fishermen's Associations.

"We need a substantial turn around in our resource, but Congress is just listening to the large trawler organizations, seafood processors, and National Fishing Institute representing their financial needs," Grader says.

Providing the public with a window of information into the financial condition of the fisheries industries could be part of the needed turnaround towards management that increases fish populations in U.S. waters.

"Each time fish stocks decrease and the number of vessels remain the same, the harvesting industry becomes less solvent if no price adjustment is made in the market value of the fish," says Mike Grable, chief of the financial services division at NMFS.

"The only way to know fixed costs of harvesting operations in the fisheries is by finding out how much total allowable production has decreased on a fishery by fishery basis." says Grable.

Alan Snimada, a spokesman for the science and technology division in NMFS, believes financial solvency reporting in the U.S. fisheries harvesting industries could reveal a real problem for the government.

"If the fish harvesting industry is shown to be financially insolvent, then the U.S. government is carrying an industry that has gone down the tubes," Snimada warns.

Seafood traders and news about the wholesale seafood market can be found online at: http://www.seafood.com.