```
Fishery Management: American Fisheries Act Produces Benefits (Letter
Report, 06/29/2000, GAO/RCED-00-176).

Pursuant to a legislative requirement, GAO reviewed the: (1) American
Fisheries Act's impact on the production of pollock fillets and the
price paid for them; and (2) act's positive and negative impacts on
fishing operations in the pollock fishery and other fisheries in Alaska.

GAO noted that: (1) the act has had a positive effect on the production
of pollock fillets; (2) although U.S. production of Bering Sea pollock
fillets dropped by about 10 percent in 1999, production for the
completed portions of the 2000 season are up nearly 27 percent over 1999
levels; (3) the act is just one of many factors that affect supply, and
GAO was unable to isolate its effects from those of other factors, such
as price fluctuations and increases and decreases in fillet production
in other parts of the world; (4) however, increased fillet production
does appear to have resulted in part from the act's structure for
creating fishing cooperatives; (5) by giving cooperative members more
certainty about a share of the fishing quota, the cooperative agreements
largely stopped the competition for fish; (6) as a result, cooperative
members could take more time to process their catch into fillets rather
than surimi, which is faster to produce; (7) by slowing down to produce
fillets, cooperative members who process fish aboard ships at sea were
also able to increase the amount of edible product from each pound of
catch by 20 percent over 1998 levels; (8) to the extent that the act
encouraged greater production of fillets, it had some effect on price as
well; (9) between 1998 and 1999, when fillet production slumped
worldwide, prices for pollock fillets rose as much as 74 percent; (10)
however, for the completed portion of the 2000 season, prices have
fallen over 20 percent from the comparable parts of the 1999 season;
(11) lower prices in 2000 may also have been affected by
larger-than-usual inventories carried over from 1999, decreased demand
after customers switched to other products when prices rose in 1999, and
the Chinese offering their pollock fillets at below-market prices; (12)
the act's provisions had a clear effect on certain other aspects of
fishery operations; (13) cooperative members almost universally report
that the cooperatives are working well--even better than expected; (14)
they are able to conduct operations in a more businesslike fashion, and
the notoriously dangerous job of fishing at sea is considered safer
because operators no longer feel compelled to spend even the worst
weather days racing for fish; (15) overcapacity in the fishery has been
further reduced because the remaining participants do not use all their
vessels; and (16) while most results have been positive, industry
officials also point to some ongoing concerns which deal with the act's
restrictions on the extent to which those involved in the pollock
fishery can also participate in other fisheries.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  RCED-00-176
     TITLE:  Fishery Management: American Fisheries Act Produces
	     Benefits
      DATE:  06/29/2000
   SUBJECT:  Fishing industry
	     Prices and pricing
	     Fishery legislation
	     Fishes
	     Marine policies
	     Marine resources conservation
IDENTIFIER:  Bering Sea
	     Alaska

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GAO/RCED-00-176

Resources, Community, and
Economic Development Division

B-285325

June 29, 2000

Congressional Requesters

About one-third of the total commercial fish harvest in the United States is
pollock caught in the Bering Sea off Alaska. As the supply of better-known
groundfish like cod has dropped,1 the demand for pollock, which is a valued
source of fillets, surimi,2 and other products, has increased. In past
years, this increased demand led fishing vessels to compete to catch as many
fish as possible before the overall catch limit was attained and the season
closed. Vessels that caught the most fish before the catch limit was reached
stood to make the most money. Over the years, as more and more vessels
joined this race, the pollock fishery became overcrowded, with too many
vessels chasing a set amount of fish. To address this situation, in 1998,
the Congress passed the American Fisheries Act (P.L. 105-277, division C,
title II). The act reduced the number of vessels eligible to participate in
the fishery by declaring nine, predominantly foreign-owned, vessels as
permanently ineligible. It also changed the way the annual allowable catch
was allocated among the various sectors of the fishing industry and set up a
structure for the formation of fishing cooperatives to help end the
competition for fish.

During debate on the act, concerns were raised that reducing the number of
eligible vessels and redistributing the catch would result in a greater
emphasis on surimi production, making restaurants and seafood companies
unable to obtain the fillets they needed to supply their customers. To
determine if this was happening, the act required us to report on whether
the market for pollock fillets was being adversely affected. This report
addresses the act's impact on the production of pollock fillets and the
price paid for them, as well as some of the act's

positive and negative impacts on fishing operations in the pollock fishery
and other fisheries in Alaska.3

To date, the act has had a positive effect on the production of pollock
fillets. Although U.S. production of Bering Sea pollock fillets dropped by
about 10 percent in 1999 (the year after the act was passed), production for
the completed portions of the 2000 season are up nearly 27 percent over 1999
levels. The act is just one of many factors that affect supply, and we were
unable to isolate its effects from those of other factors, such as price
fluctuations and increases and decreases in fillet production in other parts
of the world. However, increased fillet production does appear to have
resulted in part from the act's structure for creating fishing cooperatives.
By giving cooperative members more certainty about a share of the fishing
quota, the cooperative agreements largely stopped the competition for fish.
As a result, cooperative members could take more time to process their catch
into fillets rather than surimi, which is faster to produce. By slowing down
to produce fillets, cooperative members who process fish aboard ships at sea
were also able to increase yields (the amount of edible product from each
pound of catch) by 20 percent over 1998 levels.

To the extent that the act encouraged greater production of fillets, it had
some effect on price as well. Between 1998 and 1999, when fillet production
slumped worldwide, prices for pollock fillets rose as much as 74 percent.
However, for the completed portion of the 2000 season, prices have fallen
over 20 percent from the comparable parts of the 1999 season. As with
supply, many other factors besides the act can potentially affect price,
and, again, we could not isolate the act's effects from these other factors.
Lower prices in 2000 may also have been affected by, for example,
larger-than-usual inventories carried over from 1999, decreased demand after
customers switched to other products when prices rose in 1999, and the
Chinese offering their pollock fillets at below-market prices.

The act's provisions had a clear effect on certain other aspects of fishery
operations. Most are positive, and most stem from the formation of fishing
cooperatives. Cooperative members almost universally report that the
cooperatives are working well--even better than expected. They are able to
conduct operations in a more businesslike fashion, and the notoriously
dangerous job of fishing at sea is considered safer because operators no
longer feel compelled to spend even the worst weather days racing for fish.
Overcapacity in the fishery--something the act addressed by removing the
nine, largely foreign-owned, vessels has been further reduced because the
remaining participants do not use all their vessels. In 1999, for example,
only 14 of the remaining 20 eligible vessels that can both catch and process
pollock at sea were used during the summer/fall season. While most results
have been positive, industry officials also point to some ongoing concerns.
Most of these concerns deal with the act's restrictions on the extent to
which those involved in the pollock fishery can also participate in other
fisheries, such as cod or yellowfin sole.

Bering Sea pollock is the largest U.S. fishery by landed weight, with over
1.2 million metric tons landed in 1998 and .98 million metric tons in 1999
(see fig. 1).4 The annual value of pollock products after primary processing
is roughly estimated by industry participants at about $700 million. Bering
Sea pollock are currently harvested in a series of four fishing seasons
during the year. These four seasons are commonly grouped into two distinct
periods--January through May (winter/spring season) and June through October
(summer/fall season). Only the winter/spring season had been concluded for
2000 at the time we completed our review.

Note: Excludes shellfish and other marine species, such as sea urchins and
seaweed. The 1999 total for all other fish species was unavailable at the
time of our review.

Source: National Marine Fisheries Service.

The growth of the American Bering Sea pollock fishery was made possible by
the Fishery Conservation and Management Act of 1976,5 later amended and now
known as the Magnuson-Stevens Fishery Conservation and Management Act. This
act established a fishery conservation zone that extended federal
jurisdiction for fishery resources in coastal waters beyond state boundaries
to 200 miles from the U.S. coastline and gave priority to American fishermen
to fish within this zone. The Secretary of Commerce manages the fishery
through the National Marine Fisheries Service (NMFS), an agency within the
Department of Commerce's National Oceanic and Atmospheric Administration,
and through the North Pacific Fishery Management Council (Council).6 The
Council acts as an advisory board and recommends fishery management actions
to the Secretary of Commerce.

Although at first content to catch and deliver pollock to foreign vessels
for their use, Americans soon started investing in vessels capable of both
catching and processing pollock at sea. After these catcher/processor
vessels proved that pollock could be caught and processed profitably,
companies (primarily Japanese) began constructing processing plants on land.
By 1990, the catcher/processor vessels were catching an estimated 80 percent
of the total allowable annual catch, and controversy developed over how the
annual pollock catch should be distributed. To protect and expand their
investment in processing plants built onshore, the companies and their U.S.
trade association petitioned the Council to divide the allowable annual
catch of Bering Sea pollock between the offshore sector of the industry and
the "inshore" sector--those catching pollock and processing it either in
shore-based plants or in processing vessels located just offshore. In 1991,
the Council approved such an allocation formula. From the annual total
allowable pollock catch, an amount was first set aside as a contingency
reserve. Half of this reserve was used to adjust for changes in pollock
populations and operational problems in the fishery; the other half was
allocated to western Alaskan native communities in what is termed a
Community Development Quota (CDQ). These communities do not, for the most
part, actually catch or process pollock but instead sell their allocation to
the highest bidder in either the offshore or inshore sector. However, CDQ
groups are making major investments in various groundfish fisheries and
becoming more directly involved in the harvesting and processing of fish.
After this initial deduction, the rest of the total allowable catch was
distributed as follows:

� 65 percent to the offshore sector. This sector consists of three types of
vessels: (1) catcher/processors; (2) motherships that process pollock but do
not catch it; and (3) catcher vessels that catch pollock and deliver them to
the motherships and catcher/processors for processing.

� 35 percent to the inshore sector. The inshore sector consists of plants
located on or near the shore, along with catcher vessels that catch the
pollock and deliver them to the processing plants.

Although the Council's allocation formula set limits on how much pollock
each sector could catch, it did not limit how much pollock individual
vessels could catch. While the two sectors no longer had to compete with
each other for fish, within each sector the competition for fish remained.
Each fishing season, vessels raced to catch as many pollock as possible
until the sector's allocation was reached and the season closed. Vessels
that caught the most fish stood to make the most money. As more vessels
joined this competition, the pollock fishery became more and more crowded.

The Council's allocation formula also did not end the controversy over how
the annual allowable catch should be divided between the offshore and
inshore sectors. To address this issue as well as overcrowding, foreign
involvement in the fishery, and the competition for fish, the Congress
enacted the American Fisheries Act in 1998. The act changed the Bering Sea
pollock fishery in many ways. First, it eliminated nine, predominantly
foreign-owned, catcher/processor vessels by listing them as permanently
ineligible to participate in the fishery. Second, it increased the
allocation for the CDQ program and then distributed the remaining quota
equally between the inshore and offshore sectors.7 The offshore sector's 50
percent was further split with the catcher/processors and their catcher
vessels receiving 40 percent, and the catcher vessels supplying the
motherships receiving the remaining 10 percent.

The American Fisheries Act also provides for the formation of fishing
cooperatives. These cooperatives were designed to eliminate the competition
for fish by assigning a specific amount of fish to each cooperative member.
Members could then catch and process their fish allocation at a slower pace.
A slower processing pace allows time for labor-intensive activities that
emphasize the production of higher-valued products like deep-skin fillets (a
fillet with the layer of fat removed). Catcher/processors formed a
cooperative before the start of the 1999 season. However, the act did not
authorize the motherships or the inshore sector to operate as cooperatives
until January 1, 2000. The catcher vessels for both the inshore processors
and the offshore motherships established cooperatives and used them for the
first time during the winter/spring season of 2000.

Fillet Supply

During debate on the act, concerns were voiced that the supply of fillets
might be inadequate because fillet-producing vessels were being removed from
the offshore sector, and the inshore sector, which historically produced
surimi, was receiving a higher portion of the allowable catch. This has not
happened. For the completed portions of the 2000 harvest, the production of
pollock fillets has increased over 1998 levels. Among the many factors that
could have affected this increase, two stand out. One, a low supply of
fillets from other sources in 1999 (accompanied by an increase in price),
was the result of many market conditions and was not a product of the act.
The other, however, was a direct consequence of the act's provision allowing
the various sectors of the industry to form cooperatives and end the
competition for fish. This change freed up time and resources to devote to
the slower processing of fillets.

2000 Harvest

Because all four fishing seasons for 2000 had not been completed by the time
of our review, we could not compare the full pollock harvest for 1998, 1999,
and 2000. However, as table 1 shows, in 1998, fillet production totaled
about 56,000 metric tons, and in 1999, it totaled about 50,000 metric tons,
a drop of about 10 percent. This drop reflected an overall reduction in the
total allowable catch of pollock during the period. To protect declining
pollock stocks and the Steller sea lion,8 which eats pollock, the Council
reduced the total allowable pollock catch for 1999 by about 11 percent from
1998 levels.

                          1998                      1999

                          Thousand    Percentage    Thousand    Percentage
 Sector                   metric tons               metric tons
                                      of total                  of total
 Offshore
 catcher/processors       40.5        72.7          32.6        65.2
 Offshore motherships     0           0             0           0
 Inshore producers        15.2        27.3          17.4        34.8
 Total                    55.7        100.0         50.0        100.0

Note: Production figures include the Community Development Quota, most of
which was purchased by the offshore sector.

Source: National Marine Fisheries Service.

While the production of pollock fillets declined overall, it actually
increased among inshore producers, the sector that historically produced
relatively few fillets. As table 1 shows, production rose from 15,200 metric
tons in 1998 to more than 17,000 metric tons in 1999. The reduction in
fillet production occurred among the offshore catcher/processors, which
experienced an overall reduction of 50 percent in their pollock allocation
between the winter/spring season of 1998 and the same season of 1999.9

While the final season of the 2000 harvest was not yet under way when we
completed our review, production data were available for the winter and
spring seasons. For these seasons in 1998, 1999, and 2000, fillet production
increased each year (see table 2). Fillet production for the winter/spring
2000 season totaled over 23,000 metric tons, an increase of nearly 27
percent from 1999 and 50 percent from 1998. Most of the increase came from
the inshore sector, where production more than doubled from the 1998 level.
Whether these trends will continue through the remaining seasons of the 2000
harvest is unknown at this point.

                    1998 winter/spring    1999 winter/spring   2000 winter/spring
                    Thousand              Thousand             Thousand
 Sector             metric   Percentage   metric  Percentage   metric   Percentage
                    tons     of total     tonsa   of total     tons     of total
 Offshore
 catcher/processors 11.0     71.0         12.8`   70.3         12.8     55.4
 Offshore
 motherships        0        0            0       0            0        0
 Inshore producers  4.4      29.0         5.4     29.7         10.3     44.6
 Total              15.4     100.0        18.2    100.0        23.1     100.0

Note: Production figures include the Community Development Quota, most of
which was purchased by the offshore sector.

a1999 figures have been updated to reflect changes and corrections from
totals reported previously.

Source: National Marine Fisheries Service.

Part of the increase in fillet production, particularly among inshore
processors, was likely the result of high prices and the lack of production
from certain other sources. In 1999, the Russian production of pollock
dropped sharply. Russia has historically produced a large portion of the
total pollock fillets available, but its production has dropped, with
overfishing cited as the primary reason for the decline. Many industry
officials we talked with agreed that the severe decline in Russian
production, coupled with an overall decline in worldwide groundfish stocks,
spurred the demand for American Bering Sea pollock fillets. This demand was
accompanied by a substantial increase in the price paid for pollock fillets.
Market forces like these are largely outside the effects of the act, and the
complex interaction of such forces is one reason it is difficult to
determine the effect of any single factor, including the effect of the act
itself. However, it is likely that a low worldwide supply, continuing
demand, and the resulting high fillet prices caused the inshore sector to
increase its production of pollock fillets in 1999.

Production

While many of the reasons for increased fillet production were driven by
market factors, the increase also partly resulted from a fundamental shift
in how the fishing industry operated within the American Bering Sea pollock
fishery. By the 2000 season, both the offshore and inshore sectors of the
industry had formed cooperatives. These cooperatives ended the competition
for fish and allowed members of the cooperatives to take more time to catch
pollock and process fillets. By doing so, cooperative members were also able
to turn the fish they caught into higher yields of various products.

Cooperatives began in the offshore sector. The act provided for the offshore
catcher/processors to form and operate as a cooperative starting with the
winter/spring season of 1999 and for the motherships to do likewise in the
winter/spring of 2000. These agreements ended the competition for fish.
Because members of the catcher/processor cooperative were now guaranteed a
set amount of pollock, many decided they could invest in additional
fillet-producing equipment and increase fillet production to take advantage
of the high 1999 fillet prices. By slowing down to produce fillets, the
catcher/processors were also able to increase yields by an average of 20
percent. Before the formation of the cooperative, they raced to process the
fish into whatever product could be processed the fastest, usually surimi.
With the race over, they could focus on producing the products most
preferred by customers.

Before the start of the winter/spring 2000 season, the inshore catcher
vessels organized themselves into seven cooperatives in which each
cooperative receives a specific quota share and sells mainly to one
processor. Like the offshore processors, the inshore processors stated that
the end of the competition for fish in their sector was one factor
encouraging them to add fillet-producing equipment and increase their
production of fillets in 2000.

To the extent that the act's provisions helped increase fillet production,
they also affected fillet prices. Fillet production in the American Bering
Sea pollock fishery was stimulated by prices that rose substantially between
1998 and 1999. By 2000, as supplies rose, prices dropped.

Between 1998 and 1999, prices rose substantially but then receded in 2000
(see table 3). For pollock fillets produced in the winter/spring season of
1999, the average price for deep-skin fillets was $1.81 a pound, a
41-percent increase over 1998. The price for other fillets (that is, fillets
without the fat layer removed) at $1.58 a pound, increased even more--74
percent. For the winter/spring season of 2000, average prices fell from
their 1999 highs to $1.38 a pound for deep-skin fillets and $1.21 a pound
for other fillets.

                                        Percentage

 Product           1998   1999   2000   change,

                                        1999-2000
 Deep-skin fillets $1.28  $1.81  $1.38  -24
 Other fillets     $0.91  $1.58  $1.21  -23

Source: Fisheries Market News Report.

Since the act's passage, fillet prices have responded predictably to changes
in fillet demand and supply. A limited supply of fillets worldwide
contributed to the price increases from 1998 to 1999, while an increasingly
abundant supply contributed to the price declines between 1999 and 2000.
More specifically, factors that affected fillet supply and demand, and
consequently fillet prices, between 1999 and 2000 included the following:

� Carry-over of inventory from 1999. By the end of 1999, supply had begun to
rebound. As a result, industry officials stated that the amount of fillets
carried over to 2000 was higher than the amount carried over the year
before.

� Increased quota for the American Bering Sea pollock fishery. The size of
the total allowable catch approved by the Council for 2000 is up about 15
percent over the allowable catch in 1999.

� Decrease in demand as consumers switched to other meat sources. Industry
officials said pollock fillets are very price-sensitive. In 1999, when the
price was high, many consumers switched to other products, such as chicken
and beef. Industry officials estimated that it might take at least a year to
win these consumers back to fish.

� Price reductions by Chinese producers. Pollock fillets produced by Chinese
factories have been sold below the going market rates. Industry officials
stated that this was done to keep the Chinese plants at full operation and
their workers employed.

� Price reductions by some Alaskan processors. Inshore processors, who
historically produced surimi, started producing large quantities of fillets
for the first time in 2000. Because these processors were new to the market,
industry officials stated that some were willing to sell at slightly below
the going market rates to attract customers and establish a future customer
base.

We could not isolate the act's effect from the effects of these and many
other factors. However, because the act's provisions on fishing cooperatives
had a definite effect on increasing fillet production and because increased
production is likely to have some effect on the price of pollock fillets, it
seems reasonable to infer that the act had a price effect as well.

To this point, other effects of the act appear largely positive. Many of
these effects have stemmed, directly or indirectly, from the formation of
fishing cooperatives. Benefits cited by cooperative members and others
include safer operations, improved cooperation among vessel operators, and
the opportunity for more businesslike operations. Overcapacity in the
fishery has also been reduced beyond the levels attained by the mandatory
removal of the nine, predominantly foreign-owned, vessels. Nonetheless, we
did hear occasional criticisms from industry representatives or cooperative
members about the implementation of some of the act's provisions. Criticisms
by those in the pollock fishery centered on ways in which the act limited
them from participating in other fisheries where they had traditionally
operated.

The industry views itself as safer. Deep-sea fishing in the Bering Sea has
historically been a hazardous occupation, and the hazards are increased when
vessel operators believe they must operate in extremely bad weather to land
a share of the catch. Because the cooperative agreements give members
specific shares of the catch, vessels can now avoid fishing in such weather
conditions.

Another benefit has been that vessels can now justify catching fewer fish
per trip. Catching fewer fish per trip improves product quality and
utilization by reducing bruising and damage to fish. Fewer fish per trip
also disperses fishing pressure over a wider area and a longer period of
time. Dispersing fishing pressure over a wider area and period of time is
viewed by NMFS' officials as helping to achieve their objective of reducing
the interaction between fishermen and endangered Steller sea lions foraging
for pollock. The average number of days at sea for the catcher/processors
between 1995 and 1998 was 26 days for the winter/spring season. This
increased to 59 days for the same season in 1999. One mothership reported
spending 16 days at sea during the winter/spring season before the
cooperative and 41 days after its formation.

Industry representatives and cooperative members noted that cooperation
between individual members and with other cooperatives has increased. They
pointed to such things as an increased willingness to share information on
where to find fish, the size of those fish, and whether bycatch in an area
is a problem. One example cited of this increased cooperation is an attempt
to minimize bycatch in new and unfamiliar areas of the fishery.10 In such
areas, where vessels are less certain about the extent to which pollock may
be found with other species, industry officials said vessels will first fish
with a smaller net to assess the amount of bycatch. If bycatch is a problem,
the vessel will move and will also share this information with other
vessels. In addition, equipment has been placed on vessels to start testing
the water in hopes of creating a database that will help avoid fishing where
water conditions are most likely to create high bycatch rates.

Industry officials and cooperative members describe the formation of
cooperatives as making their operations more businesslike. For example, they
said it is now possible to better estimate income and expenses and use that
information to decide whether to invest in additional equipment or operate
all or some vessels. They also cited instances in which large vessels with a
small amount of quota share remaining will sell it to another cooperative
member because selling it is more cost-efficient than taking the vessel out
again. Some officials also stated that, for the first time, they could
actually work with their customers to produce the size and type of fillets
or grade of surimi that each prefers.

Because the harvest is no longer a competition for fish, some members of the
cooperative no longer use all their vessels, which they formerly needed to
catch their share of the quota as quickly as possible. As a result, the
problem of overcapacity--too many boats chasing a set amount of fish--has
been reduced. For example, of the 20 catcher/processors named by the act as
eligible to operate in the fishery, 16 fished the winter/spring season, and
only 14 fished in the summer/fall season of 1999. Similarly, none of the
seven eligible catcher vessels that supply the catcher/processors fished in
the winter/spring season of 2000. Instead, their quota was sold to the
catcher/processors, which then proceeded to catch the fish themselves.

Some cooperative members voiced concern about ways in which the act's
implementation limited them from participating in other fisheries where they
had traditionally operated. Historically, members of the cooperative often
participated in several different fisheries. When the pollock season ended,
they would move vessels from pollock fishing into other fisheries, such as
cod. The act recognized the advantage that members of cooperatives could
have if allowed to move into other fisheries without restrictions. Because
they could now fish for pollock when they wanted to without fear of losing
their share of the catch, members of the cooperative could potentially set
up their fishing schedules to take as much of the catch as possible from
other fisheries as well. The act limited how much of these other species
cooperative members could catch by capping them at the fleet's average
harvest percentage in the years 1995 through 1997. They are not guaranteed
this amount but may not catch more than the cap.

While we found that most members of cooperatives accept the limits placed on
them to protect fully utilized fisheries, some expressed concern about the
restrictions that keep them from increasing their share of fisheries that
are considered underutilized. For example, industry officials told us that
the annual quota for yellowfin sole is never achieved because these fish
require special handling and because halibut bycatch limits are usually
reached before the full quota of yellowfin sole is caught. As a result, this
fishery is considered to be underutilized. Some cooperative members said
they have considered expanding and improving their operations for processing
yellowfin sole. However, they are restricted to their average historic share
of the yellowfin sole market between 1995 and 1997, and this amount is
considered too small to warrant any additional investment. The Council is
presently considering measures that might resolve this concern.

According to industry officials, under the implementation approach adopted
by the Council, an inshore catcher vessel's share of the quota remains with
that vessel until the act expires. Thus, even if a vessel operator has
decided to use fewer vessels to catch the allotted share of the quota, or
even if the operator has decided to sell the share to another member of the
cooperative and not fish at all, the vessel cannot be removed from the
fishery. To maintain the share of the quota from year to year, that vessel
must still make at least one delivery of fish. This requirement precludes
the scrapping or other permanent removal of vessels.

All in all, the American Fisheries Act appears to be working well. It did
not adversely affect the market for pollock fillets, and particularly with
regard to supply, it has had a definite effect in increasing fillet
production. Perhaps of greater significance, the fishing cooperatives it
authorized appear to have provided the stability and flexibility needed for
companies to respond to such basic market forces as supply, demand, and
price. Other benefits include improvements in productivity, safety, product
quality, and use of the fishery. While industry representatives and
cooperative members have raised some concerns about specific issues, most
are supportive of what has been accomplished under the act. These "lessons
learned" may have implications for solving problems in other fisheries beset
by similar pressures of overcapacity and competition for fish.

We provided the Department of Commerce and the North Pacific Fishery
Management Council with a draft of this report for review and comment. While
the Department did not indicate whether it agreed with the overall message
of our report, it did provide technical comments that we incorporated as
appropriate. The Council agreed with our findings on fillet production and
with our conclusion that the act had benefited the pollock fishery in many
ways. The Council noted, however, that it has concerns regarding the
structure of the various cooperative agreements and that the act has created
a series of potentially adverse impacts for non-pollock fisheries, along
with tremendous pressure to enact similar programs to manage other fisheries
in the North Pacific. The Council indicated that addressing these issues is
consuming the majority of the Council's time and resources.

To determine if the act had adversely affected the production of pollock
fillets, we obtained and reviewed data on the production of pollock products
from NMFS. To determine changes in fillet prices since the act's
implementation, we obtained and reviewed price data from industry market
reports, the processors, and their customers. We did not perform reliability
tests on either the volume of fish produced or price data but these data are
widely used throughout the industry. We also reviewed the act itself and its
legislative history, as well as various industry publications, market
reports, and Federal Register notices concerning the act.

To identify positive and negative effects of the act and to learn about the
history of the pollock fishery, the development of the American Fisheries
Act, and the act's effects during 1999 and the winter/spring season of 2000,
we interviewed representatives of six of the nine members of the
offshore/catcher processor cooperative, four of the seven inshore
processors, and all three of the motherships. We also talked with companies
identified by both the inshore and offshore sectors as their major
customers. The processors and seafood companies we contacted are listed in
appendix I. Finally, we talked with officials from NMFS, the Council, and
associations representing the fishing industry.

We conducted our review from February through June 2000 in accordance with
generally accepted government auditing standards.

We are sending copies of this report to the Honorable William M. Daley,
Secretary of Commerce; Dr. D. James Baker, Under Secretary for Oceans and
Atmosphere, the National Oceanic and Atmospheric Administration; Penny
Dalton, Assistant Administrator for Fisheries and Director of the National
Marine Fisheries Service; Richard Lauber, the Chairman of the North Pacific
Fishery Management Council; and other interested parties. We will also make
copies available to others upon request.

If you have any questions about this report, please contact me at (206)
287-4800. Key contributors to this report were Jerry Aiken, Jill Berman, and
Bill Wolter.
James K. Meissner
Associate Director, Energy,
Resources, and Science Issues

List of Requesters

The Honorable Judd Gregg
Chairman
The Honorable Ernest F. Hollings
Ranking Minority Member
Subcommittee on Commerce, Justice, State,
the Judiciary, and Related Agencies
Committee on Appropriations
United States Senate

The Honorable Harold Rogers
Chairman
The Honorable Jos� Serrano
Ranking Minority Member
Subcommittee on Commerce, Justice, State,
the Judiciary, and Related Agencies
Committee on Appropriations
House of Representatives

The Honorable Slade Gorton
The Honorable Mitch McConnell
The Honorable Frank Murkowski
The Honorable Patty Murray
The Honorable Ted Stevens
United States Senate

Companies and Associations Contacted

Catcher/Processors

American Seafoods Company
Trident Seafoods Corporation
Arctic Storm, Inc.
Glacier Fish Company
F/T Highland Light
F/T Starbound

Motherships

Supreme Alaska Seafoods
Golden Alaska Seafoods, Inc.
Premier Pacific Seafoods

Inshore Processors

Unisea Seafood Corporation
Trident Seafoods Corporation
Icicle Seafoods, Inc.
Alyeska Seafoods

Seafood Companies

Gorton's Inc.
Cold Water Seafoods Corporation
Long John Silvers
Burger King

Industry Associations

At-Sea Processors Association
Pacific Seafood Processors Association

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1. "Groundfish" is a general term that refers to fish that live on or near
the seafloor, including cod, haddock, pollock, and ocean perch.

2. Surimi is a fish paste that is converted to imitation crab, lobster, and
other products.

3. We issued an interim report that addressed the act's impact by the end of
the first fishing season after the act's passage. See Fishery Management:
Market Impacts of the American Fisheries Act on the Production of Pollock
Fillets (GAO/RCED-99-196, June 30, 1999). This final report covers both that
first season and subsequent seasons through April 2000.

4. A metric ton equals 2,205 pounds.

5. 16 U.S.C. 1801 et seq.

6. The Magnuson-Stevens Act established eight regional councils and required
them to prepare fishery management plans for each fishery within their
jurisdiction that they determined required active federal management and to
review and revise these plans as necessary.

7. An additional amount was subtracted from the total allowable catch to
allow for the incidental taking of pollock by other fisheries. This is
called a bycatch allowance.

8. The Steller sea lion is protected by the Endangered Species Act of 1973,
as amended, 16 U.S.C. 1531 et seq.

9. The 50 percent reduction was the result of an 11 percent drop in the
annual quota, a reduction in the amount that could be caught in the
winter/spring season, the change in the allocation formula, and an increase
in the Community Development Quota.

10. In comparison with many other species, bycatch is less of a problem for
the pollock fishery. Pollock swim in enormous, tightly packed schools,
generally leaving room for little commingling with other fish species.
Bycatch rates in the pollock fishery are usually less than 2 percent, and
the fishery is considered by the United Nations' Food and Agricultural
Organization to be one of the "cleanest" in the world.
*** End of document. ***
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