Allocations to Processors: Definitions and Impacts

Allocations to Processors: Definitions and Impacts Presentation to Pacific Fishery Management Council Workshop on Trawl IQs Marcus Hartley April 2006

IFQ Specific Program Options for Defining Processors • Program A: Processors are defined as those facilities that take ownership of, and process, unprocessed groundfish. • Program B: Processors are defined as in the FMP—those facilities that process either unprocessed or already processed groundfish or receive live fish for resale. • Program C: Processors are defined as those facilities that take ownership of, and process, unprocessed groundfish.

The Problem • Official data do not exist to produce a complete or accurate list of the entities that would be entitled to an allocation of QS/QP according to those definitions. • Without a reliable indication of which entities would be entitled to QS/QP, the analysis of the impacts of the IFQ programs would be incomplete and be susceptible to legal challenge.

Processor-ID in PacFIN • The term “Processor” developed in the alternatives differs from the way that data have been collected in the PacFIN Fish-Ticket data set. • PacFIN’s “Processor-ID” field, is more correctly described as “First Receiver ID” • These entities may in fact be the actual processor of the fish, but they may also be agents of processors, independent buyers, restaurants, wholesale distributors, brokers, and possibly other types of entities.

FMP Definitions of Processors and Processing • Definitions in the Alternatives implicitly rely on the definition of processing in the FMP. Specifically: “Processing or to process means the preparation or packaging of groundfish to render it suitable for human consumption, retail sale, industrial uses, or long-term storage, including, but not limited to, cooking, canning, smoking, salting, drying, filleting, freezing, or rendering into meal or oil, but does not mean heading or gutting unless additional preparation is done.”

FMP Definition Issues • In the FMP definition, processors clearly do more than reselling or re-distributing fish. • The FMP definition appear to disqualify all receivers of fish that simply resell the fish or redistribute the fish. • However, the FMP definition of processing also specifically states that heading or gutting of a fish does note equate to processing. • The FMP also implies that simply bleeding, gutting, heading, or selling whole fresh fish does not equate to processing.

Implications of the FMP • The implication of the previous bullet is that, in order to determine if a fish has been processed, and therefore whether an entity is a processor eligible to receive QS/QP for that fish, NMFS must know specifically what was done to the fish after each entity takes possession of it. • Those data do not exist!

Potential “Processors” • Recipients of fresh fish that is whole, bled, gutted, or headed and gutted that undertake additional processing • Restaurants, Grocery stores and Consumers might qualify, along with the entities that are typically thought of as “processors”. • Under both options, entities that are not located in the US, entities that are not owned by US citizens, and individuals that are not US citizens may actually qualify for QS/QP allocations. • Finally it appears that under Program B, initial processors, secondary processors, tertiary processors and so-on could all qualify for QS/QP from a single fish.

Concerns from the EIS Perspective • These concerns may have significant socio-political implications • the Consulting Team is concerned that the issues have significant implications on the development of an EIS. • All potential recipients of QS/QP would be considered directly affected, including restaurants and retail outlets that fillet fish and secondary processors. • The scope of the EIS is significantly expanded by the definition of processors as currently stated in the Alternatives.

Example 1: • “Joes,” a facility in Newport, buys a load of flatfish from a vessel. • Joes fillets 85 percent of the fish and sells them into the distribution chain. • Joes fills a special order for whole fish for “Jacks,” a high-end white tablecloth restaurant with the remaining 15 percent of the flatfish • Chefs at Jacks fillet the flatfish at the diner’s tables and pan-sear them to perfection. • A strict interpretation of the FMP would mean that Jacks would be the Processor entitled to 15% of QS, while Joes would get 85% of the QS.

Example 2 • Joes freezes 500 lbs of thornyheads after heading and gutting. • Joes sell to “Jims” in Bellingham, • After storing, Jims refreshes and fillets them, and send them down to Jacks. • Chefs at Jacks skin the fillets and cook them. • By the definition in Program B, Joes, Jims, and Jacks have all processed the fish and would all qualify for 500 lbs worth of QS.

Consulting Team Option 1 • For purposes of allocation of QS/QP, two types of processors are defined: • At-sea Processors are those vessels that operate as Motherships in the Offshore Whiting fishery or those vessels permitted to operate as Catcher Processors in the Catcher Processor Whiting Fishery. • Shore-based processors are defined as those entities that are listed in the “Processor-ID” field of Fish-tickets. • This is a simple and implementable approach that uses official data.

Consulting Team Option 2 • For purposes of allocation of QS/QP, two types of processors are defined: • An At-Sea Processor is defined as an operation that while at-sea: 1) catches or takes delivery of whole groundfish; and 2) freezes or dries that groundfish; and 3) sells the fish into a wholesale market. All such fish shall be defined as “processed at-sea.” • A Shore-based Processor is an operation, working on US soil, that takes delivery of trawl-caught groundfish that has not been “processed at-sea” or that has not been “processed on-shore”; and that thereafter engages that particular fish in “on-shore processing.”

Consulting Team Definition of Onshore Processing • “On-shore Processing” is defined as any operation that takes place on shore; and that involves: 1) cutting groundfish into smaller portions; or 2) the freezing, cooking, smoking, drying of groundfish; and 3) packaging of groundfish for resale into 100 lb units or smaller for sale or distribution into a wholesale market. • The purchase and redistribution into a wholesale market of live groundfish from a harvesting vessel is also defined as “on-shore processing.” • Entities that received fish that have not undergone “at-sea processing” or “on-shore processing” (as defined in this paragraph) and sell that fish directly to consumers shall not be considered a “Processor” for purposes of QS/QP allocations.

Implementation of allocation for QS of Processing QS (Part 1) • NMFS requests applications for QS • All entities listed in At-Sea data or in PacFIN data in “Processor-ID” or equivalent fields are eligible to apply. • All entities that believe they have met the definition of processing but which were not listed in the Processor-ID field, may also apply.

Implementation of allocation for QS of Processing QS (Part 2) • Entities claiming to be a processors, but which were not listed in Processor-ID field, must provide sufficient evidence to NMFS to back up their claim that indeed they were the “Processor” of that fish. • Therefore the only “unofficial” data that must be supplied is the special case where an independent buyer supplied “unprocessed” fish to the Claimant. • Otherwise Official Data Sets would be used.

Caveats • The Consulting Team makes no claim that the definitions and concepts provided here would withstand legal challenge.

Allocations to Processors: Definitions and Impacts