Report to Congressional Requesters

United States General Accounting Office 

GAO 

February 2004 INDIVIDUAL FISHING 

QUOTAS 

Methods for 

Community Protection 

and New Entry 

Require Periodic 

Evaluation 

GAO-04-277 
www.gao.gov/cgi-bin/getrpt?GAO-04-277.

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and methodology, click on the link above. 

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(202) 512-3841 or mittala@gao.gov. 

Highlights of GAO-04-277, a report to 

congressional requesters 

February 2004

INDIVIDUAL FISHING QUOTAS 

Methods for Community Protection and 

New Entry Require Periodic Evaluation 

Several methods are available for protecting the economic viability of fishing 

communities and facilitating new entry into IFQ fisheries. The easiest and most 

direct way to help protect communities under an IFQ program is to allow the 

communities themselves to hold quota. Fishery managers can also help 

communities by adopting rules aimed at protecting certain groups of fishery 

participants. Methods for facilitating new entry principally fall into three 

categories: (1) adopting transfer rules on selling or leasing quota that help 

make quota more available and affordable to new entrants; (2) setting aside 

quota for new entrants; and (3) providing economic assistance, such as loans 

and subsidies, to new entrants. 

In considering methods to protect communities and facilitate new entry into 

IFQ fisheries, fishery managers face issues of efficiency and fairness, as well as 

design and implementation. Community protection and new entry methods are 

designed to achieve social objectives, but realizing these objectives may 

undermine economic efficiency and raise questions of equity. For example, 

allowing communities to hold quota may result in a loss of economic efficiency 

because communities may not have the knowledge and skills to manage the 

quota effectively. Similarly, rules to protect communities or facilitate new entry 

may appear to favor one group of fishermen over another. Furthermore, 

community protection and new entry methods raise a number of design and 

implementation challenges. For example, according to fishery experts, defining 

a community can be challenging because communities can be defined in 

geographic and nongeographic ways. Similarly, loans or grants may help 

provide new entrants with the capital needed to purchase quota, but they may 

also contribute to further quota price increases. Given the various issues that 

fishery managers face in developing community protection and new entry 

methods, it is unlikely that any single method can protect every type of fishing 

community or facilitate new entry into every IFQ fishery. Deciding which 

method(s) to use is made more challenging because fishery managers have not 

conducted comprehensive evaluations of how IFQ programs protect 

communities or facilitate new entry. 

In comparing the key features of IFQ programs and U.S. fishery cooperatives, 

we found that each approach has advantages and disadvantages in terms of 

regulatory and management framework, number of participants, quota 

allocation and transfer, and monitoring and enforcement. Specifically, in terms 

of regulatory and management framework, IFQ programs have greater stability 

than cooperatives because they are established by federal regulations, while 

cooperatives are voluntary contractual arrangements. In terms of quota 

allocation and transfer, IFQ programs are open in that they allow the transfer of 

quota to new entrants, whereas cooperatives are exclusive by contractual 

arrangement among members. In terms of monitoring and enforcement, IFQ 

programs are viewed as being more difficult to administer, because NMFS must 

monitor individual participants, while cooperatives are viewed to be simpler for 

NMFS to administer, because NMFS monitors only one entity—the cooperative. 

For some fisheries, a combined approach may be beneficial. For example, a 

cooperative of IFQ quota holders can combine an IFQ program’s stability with a 

cooperative’s collaboration to help manage the fishery. 

To assist in deliberations on 

individual fishing quota (IFQ) 

programs, GAO determined (1) the 

methods available for protecting 

the economic viability of fishing 

communities and facilitating new 

entry into IFQ fisheries, (2) the key 

issues faced by fishery managers in 

protecting communities and 

facilitating new entry, and (3) the 

comparative advantages and 

disadvantages of the IFQ system 

and the fishery cooperative 

approach. 

GAO recommends that the Director 

of the National Marine Fisheries 

Service (NMFS) ensure that 

regional fishery management 

councils that are designing 

community protection and new 

entry methods for new or existing 

IFQ programs 

• Develop clearly defined and 

measurable community 

protection and new entry 

objectives. 

• Build performance measures 

into the design of the IFQ 

program. 

• Monitor progress in meeting 

the community protection and 

new entry objectives. 
Page i GAO-04-277 Individual Fishing Quotas 

Letter 1

Results in Brief 3

Background 5

Methods Exist for Protecting Fishing Communities and Facilitating 

New Entry 8

Community Protection and New Entry Methods Raise a Variety of 

Issues That Require Consideration 15

IFQ Programs and Fishery Cooperatives Have Advantages and 

Disadvantages 24

Conclusions 29

Recommendations for Executive Action 29

Agency Comments and Our Evaluation 29

Appendix I Scope and Methodology 31 

Appendix II Descriptions of Selected Individual Fishing 

Quota (IFQ) Programs 33 

Appendix III Descriptions of Selected U.S. Fishery 

Cooperatives 38 

Appendix IV Comments from the Department of Commerce 41 

GAO Comments 45

Appendix V GAO Contact and Staff Acknowledgments 46 

GAO Contact 46

Staff Acknowledgments 46

Tables 

Table 1: Differences between U.S. IFQ Programs and Fishery 

Cooperatives in Key Areas 25

Table 2: Leasing Fees under the Shetland Community Fish Quota 

Scheme 35

Contents 
Page ii GAO-04-277 Individual Fishing Quotas 

Figure 

Figure 1: Fishing-centered and Multi-industry Fishing Communities 17

Abbreviations 

IFQ individual fishing quota 

ITQ individual transferable quota 

IVQ individual vessel quota 

NMFS National Marine Fisheries Service 

NOAA National Oceanic and Atmospheric Administration 

TAC total allowable catch 

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Page 1 GAO-04-277 Individual Fishing Quotas 

February 24, 2004 

The Honorable Olympia J. Snowe 

Chairman 

The Honorable John F. Kerry 

Ranking Minority Member 

Subcommittee on Oceans, Fisheries, and Coast Guard 

Committee on Commerce, Science, and Transportation 

United States Senate 

Commercial fishing and fishing-related businesses contributed about 

$28 billion to the U.S. gross national product in 2002. However, these 

businesses are at risk of decline because about one-third of the U.S. fish 

stocks assessed by the National Marine Fisheries Service (NMFS) are 

overfished or approaching overfished conditions. The United States is not 

alone in facing this problem. According to the United Nation’s Food and 

Agriculture Organization, about 28 percent of the world’s major fish stocks 

are reported as overexploited, depleted, or recovering from depletion. 

Another 47 percent are fully exploited and are producing catches that have 

reached, or are very close to, their maximum sustainable limits. Greater 

competition for fewer fish increases the likelihood that stocks will decline 

further and catches will decrease. If a fishery—composed of one or more 

fish stocks in a geographic area—cannot be sustained, the marine 

ecosystem could be transformed, thus threatening the livelihood of 

fishermen and the way of life in many communities. 

Concerns about the condition of the world’s fisheries have led to a search 

for new management tools to maintain fisheries at sustainable levels. One 

such tool is the individual fishing quota (IFQ), which has been used 

worldwide since the late 1970s. Today, several nations, including the 

United States, use IFQ programs to manage fisheries within their 200-mile 

exclusive economic zone, where foreign vessels are generally prohibited 

from fishing. Usually, these programs are established by law. The primary 

goals of an IFQ program are to conserve the resource and reduce fishing 

capacity (e.g., the number and size of boats). Under an IFQ program, 

fishery managers set a total allowable catch (TAC) and allocate quota—the 

right or privilege to fish a certain portion of the TAC—to eligible vessels, 

fishermen, or other recipients. IFQ programs often allow a quota holder to 

United States General Accounting Office

Washington, DC 20548 
Page 2 GAO-04-277 Individual Fishing Quotas 

transfer quota by sale, lease, or other methods.1 Such transfers are 

expected to reduce the number of fishermen and vessels and consolidate 

the quota among the more efficient fishermen. In the United States, the 

Magnuson-Stevens Fishery Conservation and Management Act (MagnusonStevens Act) established eight regional fishery councils to manage the 

nation’s fisheries. These councils develop IFQ programs that are 

administered by NMFS. 

IFQ programs have achieved several desired conservation and 

management benefits, such as helping to stabilize fisheries and reducing 

excess investment in fishing capacity. However, these programs have also 

raised concerns about the fairness of initial quota allocations, the 

increased costs for fishermen to gain entry, and the loss of employment 

and revenues in communities that have historically depended on fishing. 

Responding to these concerns, Congress, through the Sustainable 

Fisheries Act, placed a moratorium on new IFQ programs in 1996. 

Congress later extended the moratorium through September 30, 2002, and 

then allowed it to expire. Fishery councils are now free to propose new 

IFQ programs. During the moratorium, fishery cooperatives emerged as 

alternatives to IFQ management in two fisheries—Pacific whiting in 1997 

and Bering Sea pollock in 1998. These cooperatives are voluntary 

contractual agreements among fishermen to apportion shares of the catch 

among themselves. The Department of Justice, in business review letters 

concerning its antitrust enforcement intentions with respect to the 

cooperatives, stated that Justice did not anticipate bringing any antitrust 

enforcement actions against the cooperatives. 

This report is the second in a series of reports you requested on individual 

fishing quotas. In December 2002, we reported on the extent of 

consolidation of quota holdings, the extent of foreign holdings of quota, 

and the economic effect of IFQ programs on seafood processors.2

 For this 

report you asked us to determine (1) the methods available for protecting 

the economic viability of fishing communities and facilitating new entry 

into IFQ fisheries, (2) the key issues faced by fishery managers in 

protecting communities and facilitating new entry, and (3) the 

comparative advantages and disadvantages of the IFQ system and the 

fishery cooperative approach. 

 1

These programs are frequently called individual transferable quota (ITQ) programs. 

2

U.S. General Accounting Office, Individual Fishing Quotas: Better Information Could 

Improve Program Management, GAO-03-159 (Washington D.C.: Dec. 11, 2002). 
Page 3 GAO-04-277 Individual Fishing Quotas 

To conduct this review, we visited domestic fishing communities in Alaska 

and Maine, as well as communities in Iceland, New Zealand, and Scotland. 

We visited these foreign countries because Iceland and New Zealand have 

extensive experience with IFQ programs, and Scotland has developed an 

innovative approach for protecting communities and facilitating new 

entry. In these locations and elsewhere, we spoke with domestic and 

foreign fishery managers, fishery participants, and fishery researchers; 

reviewed literature on domestic and foreign quota-based programs; and 

reviewed key regulations and studies. We did not evaluate the 

effectiveness of the programs in the locations we visited. See appendix I 

for additional details on our scope and methodology and appendix II for 

descriptions of the programs we reviewed. 

Several methods are available for protecting the economic viability of 

fishing communities and facilitating new entry into IFQ fisheries. The 

easiest and most direct way to help protect communities under an IFQ 

program is to allow the communities themselves to hold quota. 

Communities allowed to hold quota can decide how to use it to protect 

their economic viability by, for example, keeping the quota in the 

community and leasing it to local fishermen. Fishery managers can also 

help communities by adopting rules aimed at protecting certain groups of 

fishery participants. Under these rules, fishery managers can decide how 

quota is traded and fished in order to protect a particular group, such as 

fishermen with small boats. Methods for facilitating new entry principally 

fall into three categories: (1) adopting transfer rules on selling or leasing 

quota that help make quota more available and affordable to new entrants, 

(2) setting aside quota for new entrants, and (3) providing economic 

assistance to new entrants. Under quota transfer rules, fishery managers 

can, for example, place small amounts of quota in blocks and limit the 

number of blocks that an individual can hold, thereby making smaller 

amounts of quota available and more affordable to new entrants. Under 

set-aside methods, fishery managers can set aside a portion of the total 

quota to make a supply of quota specifically available for new entrants. 

Under economic assistance methods, government entities can provide 

low-interest loans, grants, or other subsidies to help new entrants obtain 

quota that they might not otherwise be able to afford. 

In considering methods to protect communities and facilitate new entry 

into IFQ fisheries, fishery managers face issues of efficiency and fairness, 

as well as design and implementation. Protecting communities and 

facilitating new entry are social objectives, but realizing these objectives 

may undermine economic efficiency and raise questions of equity. For 

Results in Brief 
Page 4 GAO-04-277 Individual Fishing Quotas 

example, allowing communities to hold quota may result in a loss of 

economic efficiency because communities may not have the knowledge 

and skills to manage the quota effectively. Similarly, rules to protect 

communities or facilitate new entry may appear to favor one group of 

fishermen over another. Community protection and new entry methods 

also raise a number of design and implementation challenges. For 

example, according to fishery experts, defining a community can be 

challenging, because communities can be defined in geographic and 

nongeographic ways. Similarly, loans or grants may help provide new 

entrants with the capital needed to purchase quota, but they may also 

contribute to further quota price increases. Given the various issues that 

fishery managers face in developing community protection and new entry 

methods, it is unlikely that any single method can protect every type of 

fishing community or facilitate new entry into every IFQ fishery. Deciding 

which method(s) to use is made more challenging because fishery 

managers have not conducted comprehensive evaluations of how IFQ 

programs protect communities or facilitate new entry. Consequently, we 

are making recommendations to the Director of the National Marine 

Fisheries Service to ensure that fishery councils that are designing 

community protection and new entry methods include clearly defined and 

measurable objectives, build performance measures into the design of the 

IFQ program, and monitor whether the program is achieving its 

community protection and new entry objectives. 

In comparing the key features of IFQ programs and U.S. fishery 

cooperatives, we found that each approach has advantages and 

disadvantages in terms of regulatory and management framework, number 

of participants, quota allocation and transfer, and monitoring and 

enforcement. Specifically, in terms of regulatory and management 

framework, IFQ programs have greater stability than cooperatives because 

they are established by federal regulations, while cooperatives are 

voluntary contractual arrangements. In terms of quota allocation and 

transfer, IFQ programs are open in that they allow the transfer of quota to 

new entrants, whereas cooperatives are exclusive by contractual 

arrangement among members. In terms of monitoring and enforcement, 

IFQ programs are viewed as being more difficult to administer, because 

NMFS must monitor individual participants, while cooperatives are viewed 

to be simpler for NMFS to administer, because NMFS monitors only one 

entity—the cooperative. For some fisheries, combining elements of both 

approaches can be beneficial. For example, a cooperative of IFQ quota 

holders can combine the stability of an IFQ program with the 

collaboration of a cooperative to help manage the fishery. 
Page 5 GAO-04-277 Individual Fishing Quotas 

The Magnuson-Stevens Act provides for the conservation and management 

of fishery resources in the United States.3

 The act established eight 

regional fishery management councils that are responsible for preparing 

plans for managing fisheries in federal waters and submitting them to the 

Secretary of Commerce for approval. NMFS, within the Department of 

Commerce’s National Oceanic and Atmospheric Administration, is 

responsible for implementing these plans. The eight councils are New 

England, Mid-Atlantic, South Atlantic, Gulf of Mexico, Caribbean, Pacific, 

North Pacific, and Western Pacific. 

The Magnuson-Stevens Act, as amended by the Sustainable Fisheries Act,4

also establishes national standards for fishery conservation and 

management. The fishery councils use these standards to develop 

appropriate plans for conserving and managing fisheries under their 

jurisdiction. For example: 

• National Standard 1 requires that conservation and management measures 

prevent overfishing while achieving, on a continuing basis, the optimum 

yield from each fishery; 

• National Standard 4 requires that conservation and management measures 

not discriminate between residents of different states; 

• National Standard 5 requires that conservation and management 

measures, where practicable, consider efficiency in the use of fishery 

resources; and 

• National Standard 8 requires that fishery conservation and management 

measures take into account the importance of fishery resources to fishing 

communities in order to provide for the sustained participation of these 

communities in the fishery and, to the extent practicable, minimize 

adverse economic impacts on these communities. 

In addition to the national standards, the Magnuson-Stevens Act also 

requires that new IFQ programs consider providing opportunities for new 

individuals to enter IFQ fisheries. 

 3

Pub. L. No. 94-265 (codified as amended at 16 U.S.C. §§ 1801-1883). 

4

Pub. L. No. 104-297 (1996). 

Background 
Page 6 GAO-04-277 Individual Fishing Quotas 

The Magnuson-Stevens Act defines a fishing community as one that is 

substantially dependent on, or engaged in, harvesting or processing fishery 

resources to meet social and economic needs. The definition includes 

fishing vessel owners, operators, and crew, and U.S. fish processors based 

in such a community. NMFS guidance further defines fishing community 

to mean a social or economic group whose members reside in a specific 

location.5

At the time of our review, NMFS had implemented three IFQ programs: (1) 

the Mid-Atlantic surfclam/ocean quahog program in 1990, (2) the South 

Atlantic wreckfish program in 1992, and (3) the Alaskan halibut and 

sablefish (black cod) program in 1995. New IFQ programs were being 

considered in other commercial fisheries, such as the Bering Sea crab; the 

Gulf of Alaska groundfish (e.g., pollock, cod, and sole); and the Gulf of 

Mexico red snapper. 

Under IFQ programs, fishery managers set a maximum, or total allowable 

catch, in a particular fishery—typically for a year—based on stock 

assessments and other indicators of biological productivity, and they 

allocate quota—generally expressed as a percentage of the TAC—to 

eligible vessels, fishermen, or other recipients, based on initial qualifying 

criteria, such as catch history. In the United States, fishery councils can 

raise or lower the TAC annually to reflect changes in the fishery’s health. 

Fishery managers distribute these changes among the quota holders 

proportional to their share. For example, a fisherman who received a 5 

percent quota share in a fishery with a TAC of 100 metric tons can catch 5 

tons of fish. Should the TAC increase from 100 to 200 metric tons in the 

following year, the quota holder with a 5 percent share would be able to 

catch 10 tons, or 5 tons more than the previous year. Furthermore, IFQs 

are generally transferable, meaning that quota holders can buy, sell, lease, 

or otherwise transfer some or all of their shares, depending on how much 

or how little they want to participate in the fishery. The nature of the 

fishing right varies by country. In New Zealand, for example, an IFQ is an 

exclusive property right that can be held in perpetuity, whereas in the 

United States, an IFQ represents the privilege to fish a public resource. 

While this privilege has an indefinite duration, the government may legally 

revoke it at any time. 

 5

50 C.F.R. § 600.345(b)(3). 
Page 7 GAO-04-277 Individual Fishing Quotas 

IFQ programs arose in response to conditions that resulted in a race for 

fish and overfishing and that reduced economic efficiency, safety, and 

product quality. For example, before the IFQ program, the Alaskan halibut 

fishery had limits on the amount of time allowed for commercial fishing in 

an attempt to keep the annual halibut catch within the TAC, but it did not 

have limits on the number of boats that could fish. In response, fishermen 

increased the number of vessels in their fleets and used larger vessels with 

more gear to catch as much fish as they could in the time allowed. As a 

result, the halibut season was reduced to a few days. After the IFQ 

program was implemented, the fishing season was increased to 8 months. 

Fishermen could choose when to fish and they could use more economical 

fishing methods, as long as they kept within their quota limits. 

Individual IFQ programs may differ considerably, depending on the 

circumstances of the fishery and the objectives of the program. For 

example, an IFQ program for a fishery where there are concerns about 

overfishing and the consolidation of power among corporate interests may 

have different objectives than a program for a fishery where there are 

concerns about developing the fishery and attracting new fishermen. 

Depending on the fishery, fishery managers may be willing to trade some 

potential gains in economic efficiency in exchange for the opportunity to 

protect fishing communities or facilitate new entry. 

IFQ programs are largely intended to improve economic efficiency and 

conserve the resource. According to the theory underlying IFQ programs, 

unrestricted quota trading promotes economic efficiency, because those 

willing to pay the highest price for quota would be those expected to use 

quota the most profitably, by catching fish at a lower cost or transforming 

the fish into a more valuable product. Over time, unrestricted trading 

should lead less efficient fishermen to either improve their efficiency or 

sell their quota. In contrast, restrictions on quota transfers could be 

expected to reduce the economic benefits that would otherwise be 

obtained where quota is freely transferable. Another fundamental tenet of 

this theory is that quota holders will act in ways to promote the 

stewardship of the resource. Specifically, giving fishermen a long-term 

interest in the resource is likely to provide incentives to fish in ways that 

protect the value of their interest. 
Page 8 GAO-04-277 Individual Fishing Quotas 

Several methods are available under IFQ programs for protecting the 

economic viability of fishing communities and facilitating new entry. For 

protecting communities, the easiest and most direct method is allowing 

communities to hold quota. Fishery managers may also help protect 

communities by adopting program rules aimed at protecting certain 

groups of fishery participants. For facilitating new entry into IFQ fisheries, 

the methods principally fall into three categories: (1) adopting quota 

transfer rules that promote new entry, (2) setting aside quota for new 

entrants, and (3) providing economic assistance to potential new entrants. 

Concerns have developed in the United States and in other countries about 

the potential for IFQ programs to harm the economic viability of fishing 

communities. Many fishery experts and participants are concerned that 

individual quota holders will sell their quota outside of the fishing 

community or sell their quota to large companies. If this were to occur, 

fishing jobs could leave the community and larger companies could 

consolidate their quota holdings and dominate the fishery. Fishing 

communities that lose fishing jobs may have few alternative employment 

options, particularly if they depend primarily on fishing and no other 

industry replaces fishing. 

Allowing communities to hold quota is the easiest and most direct way 

under an IFQ program to help protect fishing communities. According to 

fishery experts and participants, fishery managers can give each 

community control over how to use the quota in ways that protect the 

community’s economic viability, such as selling or leasing quota to 

fishermen who reside in the community. Community quota could be held 

by municipalities, regional organizations, or other groups representing the 

community—unlike traditional individual fishing quota, which is generally 

held by individual boat owners, fishermen, or fishing firms. Of the three 

U.S. IFQ programs, only one allows communities to buy and hold quota—

the Alaskan halibut and sablefish program. 

Communities allowed to hold quota can obtain it through allocation when 

the program begins or at any time thereafter. For example: 

• The North Pacific Fishery Management Council (North Pacific Council) is 

considering allocating quota to community not-for-profit entities as it 

develops a proposal for managing the Gulf of Alaska groundfish fishery. 

Methods Exist for 

Protecting Fishing 

Communities and 

Facilitating New 

Entry 

Methods for Protecting 

Communities 
Page 9 GAO-04-277 Individual Fishing Quotas 

• New Zealand fishery managers allocated quota to a Chatham Islands 

community trust several years after the IFQ program was implemented. 

The trust leases out annual fishing privileges to Chatham Islands-based 

fishermen to help keep fishing and fishing-related employment in the 

community. 

Similarly, fishery managers can incorporate rules into existing IFQ 

programs or into the design of new programs to allow communities to 

make quota purchases. For example, in 2002, the North Pacific Council 

amended the Alaskan halibut and sablefish IFQ program to allow 

communities along the Gulf of Alaska to purchase quota. The council is 

considering including a similar provision in the proposed plan to manage 

the Gulf of Alaska groundfish fishery. 

In addition to allowing communities to hold quota, fishery managers can 

establish rules governing who is eligible to hold and trade quota as well as 

other rules to manage quota as a means of protecting certain groups of 

fishery participants. Specific rules may vary by program and change over 

time, depending on which members or groups a council wants to protect. 

In terms of eligibility to hold quota, for example, the North Pacific Council 

initially restricted allocations of Alaskan halibut and sablefish quota to 

individual vessel owners in part to protect the fisheries’ owner-operator 

fleet. The council later expanded eligibility to allow crew members to hold 

quota without owning a vessel. 

We also identified several different types of quota transfer restrictions 

used in foreign IFQ programs that were aimed at protecting communities. 

For example: 

• Prohibiting quota sales. While none of the IFQ programs in the United 

States prohibits the transfer of quota through sales, fishery managers in 

other countries have done so. For example, Norway’s IFQ program 

prohibited all quota sales to protect fishing communities in certain 

locations. Alternatively, prohibitions could be used temporarily to help 

prevent fishermen from hastily selling their quota. For example, according 

to New Zealand fishermen we spoke with, many small boat fishermen did 

not initially understand the long-term value of their quota and therefore 

sold their quota shortly after the initial allocation. To remedy this 

situation, they suggested that fishery managers could prohibit sales for the 

first year after a program’s initial allocation to give fishermen time to make 

informed decisions about whether to sell their quota. 
Page 10 GAO-04-277 Individual Fishing Quotas 

• Placing geographic restrictions on quota transfers. Iceland and New 

Zealand fishery managers have also set limits on where quota can be sold 

or leased to protect certain groups, such as local fishermen and the 

communities themselves. The Icelandic IFQ program, in which individuals 

own vessels with associated quota rather than the quota itself, adopted a 

“community right of first refusal” rule to provide communities the 

opportunity to buy vessels with their quota before the vessels are sold to 

anyone outside of the community. IFQ programs can also regulate quota 

leasing to keep fishing in a certain area by establishing rules that limit 

leasing or fishing to residents of the community. In terms of leases, New 

Zealand’s Chatham Islands community trust has, in effect, used residence 

in the Chatham Islands as a requirement to lease its quota. 

• Limiting quota leasing. Iceland requires that all quota holders fish at least 

50 percent of their quota every other year and prohibits quota holders 

from leasing more than 50 percent of their quota each year. Fishery 

managers introduced such restrictions, in part, to minimize the number of 

“absentee” quota holders—those who hold quota as a financial asset but 

do not fish. 

Finally, according to fishery managers and experts we spoke with, fishery 

managers can help protect fishing communities by (1) setting limits on 

quota accumulation, (2) establishing separate quota for different sectors of 

the fishery, (3) requiring quota holders to be on their vessels when fish are 

caught and brought into port, and (4) restricting the ports to which quota 

fish can be landed. 

• Setting limits on quota accumulation. Fishery managers can place limits 

on the total amount of quota an individual can accumulate or hold to 

protect certain fishery participants. In the United States, for example, the 

North Pacific Council set limits on individual halibut quota holdings that 

range from 0.5 percent to 1.5 percent, depending on the fishing area, as a 

means of protecting the fishery’s owner-operator fleet. 

• Establishing separate quota for different sectors of the fishery. To 

protect small boat fishermen and local fishing jobs, Iceland developed a 

separate quota for small vessels and large vessels and prohibited owners 

of small vessels from selling their quota to owners of large vessels. In the 

U.S. halibut and sablefish IFQ program, the North Pacific Council 

established separate quota categories based on vessel type and length and 

placed certain restrictions on transfers among these categories to ensure 

that quota would be available to owners of smaller vessels. 
Page 11 GAO-04-277 Individual Fishing Quotas 

• Requiring quota holders to be on their vessels. Some programs require the 

owner of the quota to be on board when fish are caught and brought into 

port. For example, the North Pacific Council requires fishermen who 

entered the Alaskan halibut and sablefish IFQ program by purchasing 

certain categories of quota, rather than receiving it as part of the initial 

allocation, to abide by this rule. The rule was designed in part to limit 

speculative quota trading by individuals who are primarily interested in 

quota as a financial asset and not otherwise invested in the fishery. 

• Restricting landings. Fishery managers could restrict the ports to which 

quota holders or those who lease quota can deliver their catch. For 

example, New Zealand’s Chatham Islands trust leases rock lobster quota 

to local fishermen who must then land their catch in the Chatham Islands. 

IFQ programs have also raised concerns about opportunities for new 

entry. As IFQ programs move toward achieving one of their primary goals 

of reducing overcapitalization, the number of participants decreases and 

consolidation occurs, generally reducing quota availability and increasing 

price. As a result, it is harder for new fishermen to enter the fishery, 

especially fishermen of limited means, such as owners of smaller boats or 

young fishermen who are just beginning their fishing careers. According to 

New Zealand officials, quota prices increased dramatically. For example, 

the average price of abalone quota increased by more than 50 percent in 

the first 6 months of trading—from about NZ$11,000 to NZ$17,000 per 

metric ton—and, by 2003, the average price had reached about NZ$300,000 

per metric ton, or about 27 times the price at the start of abalone quota 

trading in 1988. 

To reduce the barriers to new entry, fishery managers have established 

quota transfer rules and set-asides, and/or provided economic assistance, 

such as loans or grants. In terms of transfer rules, all domestic and most 

foreign IFQ programs allow quota to be sold or leased. Allowing such 

transfers provides the opportunity for new entry to those who can find and 

afford to buy or lease quota. Since the lease price is generally below the 

sales price, leasing quota may help make entry more affordable to 

fishermen of limited means, such as small boat fishermen. 

Fishery managers can also make quota available and more affordable to 

new entrants by “blocking” small amounts of quota and limiting the 

number of “blocks” that any one individual or entity can hold. For 

example, the North Pacific Council set up two types of halibut quota at the 

initial allocation—unblocked and blocked. Unblocked quota holds no 

Methods to Facilitate New 

Entry 
Page 12 GAO-04-277 Individual Fishing Quotas 

restrictions. Blocked quota, on the other hand, is an amount of quota that 

yielded less than 20,000 pounds of halibut in 1994 and can only be bought 

or transferred in its entirety. An individual or entity can hold unblocked 

quota and one quota block; an individual who holds no unblocked quota 

can hold two quota blocks. A state of Alaska study found that estimated 

prices for blocked quota were less per pound than for unblocked quota 

over the first 4 years of the Alaskan halibut and sablefish IFQ program and 

that estimated prices for smaller blocks were less per pound than for 

larger blocks.6

Setting aside a portion of the total quota specifically for new entrants can 

also make quota available. Quota could be set aside at the time of the 

initial allocation for future distribution to entities that did not initially 

qualify for quota. For example, at the start of the Alaskan halibut and 

sablefish program, the North Pacific Council set aside a portion of the TAC 

for allocation to communities in western Alaska for community 

development purposes. According to fishery managers, similar set-asides 

could be used for new entrants by establishing the set-aside at the start of 

the IFQ program, or by buying or reclaiming, rolling over, or setting aside 

quota during the program. 

• Buying or reclaiming quota from existing quota holders. Fishery 

managers could buy back quota from existing quota holders. For example, 

the New Zealand government bought back quota to give to the indigenous 

Maori tribes in partial settlement of their claims against the government 

over fishing rights. Fishery managers could also obtain quota forfeited by 

fishermen who have not complied with program rules; in the New Zealand 

IFQ system, for example, quota holders risk forfeiting their quota holdings 

if they catch more fish than they have quota for. 

• Issuing quota for a fixed period of time and then rolling it over for 

distribution to new entrants. Depending on the program, the frequency of 

the rollover could range from every few years to annually and the amount 

of the rollover could range from some to all of the quota. For example, a 

rollover system has been proposed for Australia’s New South Wales 

fishery under which fishery managers would issue quota for a finite period 

of time (e.g., 30 years) under one set of program rules and, periodically 

(e.g., every 10 years), quota holders would have the opportunity to choose 

 6

Dinneford, E., K. Iverson, B. Muse, and K. Schelle, Changes Under Alaska’s Halibut IFQ 

Program, 1995 to 1998, Abstract, Alaska Department of Fish and Game, Commercial 

Fisheries Entry Commission (November 1999). 
Page 13 GAO-04-277 Individual Fishing Quotas 

whether to continue to participate in the old system or move their quota 

into a new system with different rules for another 30 years. 

• Setting aside TAC increases for distribution to new entrants. Foreign 

and domestic IFQ programs generally define an individual fishing quota as 

a percentage of the overall TAC and distribute any changes in the TAC 

among existing quota holders proportional to their share. Alternatively, 

fishery managers could distribute TAC increases to new entrants, leaving 

existing quota holders fishing the same amount of fish as they did in the 

previous year. 

Once fishery managers have set aside quota, they must devise a method 

for allowing new entrants to obtain it. According to fishery experts, the 

options include: 

• Selling quota at auction. Fishery managers could auction off quota to the 

highest bidder and keep the proceeds. Alternatively, the managers could 

serve as an intermediary by auctioning off quota on behalf of existing 

quota holders, and the seller would incur all losses or gains. In case the 

auction price becomes prohibitive for new entrants, fishery managers 

could set aside quota that could be sold at a lower, predetermined price.7

Economists generally support the idea of auctioning quota because an 

efficient market provides quota to its most profitable users. However, in 

the United States, the Magnuson-Stevens Act limits the amount of fees that 

may be charged under an IFQ program, which may effectively preclude the 

use of auctions. 

• Distributing quota by lottery. New entrants could be randomly selected 

from a pool of potential entrants, giving persons of limited means an equal 

chance to obtain quota. Lotteries might be especially advantageous when 

the demand for quota from new entrants is greater than the supply of 

quota set aside. 

• Distributing quota to individuals who meet certain criteria. Fishery 

managers could allocate quota to new entrants using a point system based 

on criteria such as fishing experience or completion of an apprenticeship 

program. 

 7

For example, the Clean Air Act provides for the Environmental Protection Agency to 

withhold a proportion (2.8 percent) of utilities’ annual sulfur emissions allowances and 

offer a portion of them for sale in an auction, and to set aside another portion for direct 

sale at a price specified in the statute. 
Page 14 GAO-04-277 Individual Fishing Quotas 

Finally, to help make quota affordable, fishery managers and experts told 

us that government entities could provide loans or subsidies to potential 

entrants who might not otherwise be able to afford the quota. Affordability 

is particularly an issue as an IFQ program becomes more successful and 

the value of the quota increases. 

• Loans. The Magnuson-Stevens Act allows NMFS to offer loans.8 Under this 

provision, for example, NMFS has established a low-interest loan program 

for new entrants and fishermen who fish from small boats in the halibut 

and sablefish fisheries off Alaska. The fishermen can use these loans to 

purchase or refinance quota. Since the program’s inception in fiscal year 

1998, Alaska has approved 207 loans, totaling nearly $25 million. The 

Magnuson-Stevens Act also provides for the creation of a central registry 

where owners and lenders can register title to, and security interests (such 

as liens) in, IFQs.9

 According to the National Research Council, a registry 

would increase lender confidence and provide opportunities for 

individuals to obtain financing to enter IFQ fisheries.10 Although NMFS has 

not yet established this registry, its Alaska Region maintains a voluntary 

registry where creditors, such as private banks, the state of Alaska, and 

private lenders can record liens against quota shares.11 The Alaska Region 

reported that most lending institutions take advantage of this service. The 

registry contained 2,581 reported interests in quota share at the end of 

2002.12

• Grants or other subsidies. Grants or other subsidies could decrease the 

costs associated with buying or leasing quota. Since grants do not have to 

be repaid, they could give fishermen of limited means the opportunity to 

enter the fishery and then build their capital in order to increase their 

quota holdings. In addition to grants, fishery managers could establish a 

“lease-to-own” quota program—new entrants would pay for the quota 

while using it. Also, quota could be made available for purchase or lease at 

below market prices. Iceland, for example, is considering adopting a 

 8

16 U.S.C. § 1853(d)(4). 

9

16 U.S.C. § 1855(h). 

10National Research Council, Sharing the Fish: Toward a National Policy on Individual 

Fishing Quotas (Washington, D.C.: National Academy Press, 1999), 8. 

11Lenders file against identifiable groups of quota shares and not against quota holders. 

12More than one person may have reported an interest against the same group of quota 

shares. 
Page 15 GAO-04-277 Individual Fishing Quotas 

discount program to make quota more affordable. This discounting 

scheme would allow crews of small vessels to purchase quota from the 

government at 80 percent of its market value. 

In considering methods to protect communities and facilitate new entry 

into IFQ fisheries, fishery managers face issues about efficiency, fairness, 

and design and implementation. Community protection and new entry 

methods are designed to achieve social objectives, but achieving these 

objectives may undermine economic efficiency, one of the primary 

benefits of an IFQ program, and raise questions of equity. Moreover, 

community protection and new entry methods present a number of design 

and implementation challenges. However, given the particular 

circumstances of the fishery and the goals of the IFQ program overall, it is 

unlikely that any single method can protect every type of fishing 

community or facilitate new entry into every IFQ fishery. It is also unclear 

how beneficial these protective methods can be. 

Fishery managers face an inherent tension between the economic goal of 

maximizing efficiency and the social goal of protecting communities or 

facilitating new entry. According to fishery experts we spoke with, this 

tension occurs because a community or new entrant often may not be the 

most efficient user of quota. For example, according to Icelandic fishery 

experts, some communities did not manage their quota effectively and 

sold it, reducing the communities’ economic base. In addition, setting 

aside quota for new entrants may not be the most efficient use of quota 

because experienced fishermen or fishing firms are generally able to fish 

the quota more economically than a new entrant. Adopting rules that 

constrain the free trade of quota, such as those designed to protect 

communities or facilitate new entry, would likely limit the efficiency gains 

of the IFQ program. Therefore, fishery managers have to decide how much 

economic efficiency they are willing to sacrifice to protect communities or 

facilitate new entry. 

Methods to protect communities or facilitate new entry may also raise 

concerns about equity. In the United States, certain community quotas or 

rules aimed at protecting certain groups may not be approved because 

they are not allowed under the Magnuson-Stevens Act. For example, 

National Standard 4 of the Magnuson-Stevens Act prohibits differential 

treatment of states. A rule that proposes using residence in one state as a 

criterion for receiving quota may violate the requirements of National 

Standard 4. Furthermore, methods that propose allocating quota to 

Community 

Protection and New 

Entry Methods Raise 

a Variety of Issues 

That Require 

Consideration 

Community Protection and 

New Entry Methods Raise 

Concerns about Economic 

Efficiency and Equity 
Page 16 GAO-04-277 Individual Fishing Quotas 

communities or adopting rules aimed at making quota more available or 

affordable to a certain group of fishermen can appear unfair to those who 

did not benefit and could result in legal challenges. Moreover, allowing 

communities to purchase quota may be considered unfair or inequitable, 

because relatively wealthy communities would more readily have the 

funds needed to purchase quota while relatively poor communities would 

not. 

Fishery managers face multiple challenges in designing and implementing 

community protection and new entry methods, according to fishery 

managers and experts we spoke with. The resolution of these issues 

depends on the fishery’s circumstances and the program’s objectives. It is 

unlikely that any single method can protect every kind of fishing 

community or facilitate new entry into every IFQ fishery. 

In developing an approach to protect fishing communities, fishery 

managers have to define community, determine who represents it, and 

define economic viability, and communities must determine how to use 

the quota. Defining community can be challenging because communities 

can be defined in many ways. As discussed earlier, the Magnuson-Stevens 

Act defines a fishing community as one that substantially depends on, or is 

engaged in, harvesting or processing fishery resources to meet social and 

economic needs. NMFS guidance further defines fishing community 

geographically—that is, a social or economic group whose members 

reside in a specific location. Fishery managers and experts told us that 

communities with geographically distinct boundaries are easier to define, 

such as island communities or remote communities in Alaska. However, 

some communities are difficult to define when, for example, some of the 

fishermen live away from the areas they fish, as is the case for many 

halibut fishermen who reside in other states and fish in the waters off the 

coast of Alaska. Moreover, communities can also be defined in 

nongeographic ways, such as fishermen who use the same type of fishing 

gear (e.g., hook-and-line or nets) for a particular species or people and 

businesses involved in a fishery regardless of location. These communities 

can include fishermen and fish processors, as well as support services 

such as boat repair businesses, cold storage facilities, and fuel providers. 

Once fishery managers define the community, they must then determine 

who represents the community and thus who will decide how the quota is 

used. More than one organization (e.g., government entity, not-for-profit 

organization, private business, or cooperative group) may claim to 

represent the interests of the community as a whole. For example, rural 

Designing and 

Implementing Community 

Protection Methods 

Presents Multiple 

Challenges 
Page 17 GAO-04-277 Individual Fishing Quotas 

coastal communities in Alaska, which are geographically distinct, could 

have several overlapping jurisdictions, including a local native 

corporation, a local municipality, and a local borough. Determining who 

represents the community is more difficult in communities without 

geographically distinct boundaries. 

Fishery managers also need to define what constitutes economic viability, 

which is likely to differ by community because the fishery has different 

economic significance in each community. Some communities primarily 

rely on fishing and fishing-related businesses, while others may have a 

more diverse economic base. (See fig. 1.) Consequently, it may be unclear 

what type of protection a community needs to ensure its economic 

viability. Fishery experts we spoke with agreed that few communities in 

the United States primarily depend on fishing as their economic base. 

Moreover, the balance of industries making up a community’s economy 

may change over time when, for example, the area becomes more 

modernized or a new industry enters. For example, the economy of the 

Shetland Islands changed dramatically with the development of the oil 

industry off the Shetland Islands in the 1970s. This development resulted 

in jobs and settlement funds that the community used to enhance its 

economic base through community development projects. 

Figure 1: Fishing-centered and Multi-industry Fishing Communities 
Page 18 GAO-04-277 Individual Fishing Quotas 

Finally, communities have to decide whether to keep their quota, sell it, or 

lease it to others. If they keep their quota, they also have to decide how to 

allocate it. Similarly, if they sell or lease their quota, they have to decide 

how to allocate the proceeds. Unless communities can decide how to 

allocate quota or the proceeds, the community quota may go unused and 

thus prevent the community from receiving its benefit. For example, the 

quota New Zealand’s Maori people received from the government in 1992 

has not been fully allocated to the Maori tribes, largely because the 

commission responsible for distributing the quota and the tribes could not 

agree on the allocation formula.13

Along with these definitional challenges, fishery managers and 

communities have to address other design and implementation issues, 

such as whether to establish prohibitions on quota sales or geographic 

restrictions on quota transfers. 

• Prohibitions on quota sales. Prohibiting quota sales may not allow fishing 

communities or businesses to change over time as the fishing industry 

changes. According to fishery experts we spoke with, rules that prevent 

change essentially freeze fishing communities at one point in time and may 

create “museum pieces.” For example, prohibitions on quota sales prevent 

the fishery from restructuring, thus forcing less efficient quota holders and 

fishing businesses to remain in the fishery. Consequently, prohibitions on 

quota sales may actually undermine the economic viability of the fishing 

communities they were designed to protect. In addition, prohibitions on 

quota sales might run counter to an IFQ program’s overall objective of 

reducing excess investment in the fishery because such prohibitions act to 

prevent fishermen from selling some of their boats or leaving the fishery. 

• Geographic restrictions on quota transfers. Protecting communities by 

imposing geographic restrictions on quota transfers also raises issues that 

must be considered and addressed. According to fishery experts we spoke 

with, rules that give communities the right to purchase quota before it is 

sold outside the community might be legally avoided. For example, 

Icelandic officials told us that in their IFQ program, where individuals own 

vessels with associated quota rather than the quota itself, companies 

holding quota easily avoided the “community right of first refusal” rule by 

selling their companies as a whole to an outside company, rather than just 

selling their vessels and associated quota. As a result, communities could 

 13In December 2003, legislation was introduced in the New Zealand Parliament that, among 

other things, sets out the allocation formula to be used to allocate quota to the Maori tribes. 
Page 19 GAO-04-277 Individual Fishing Quotas 

not use this rule to prevent the sale. Furthermore, communities that could 

benefit from such a rule may not have the money to purchase the quota, 

while those communities that can afford to purchase the quota may not 

need the rule’s protection. 

Other program rules aimed at protecting the community also raise 

implementation issues that fishery managers must consider: 

• Accumulation limits. The challenge in setting accumulation limits—the 

amount of quota that any one individual or entity can hold—is to set limits 

that are high enough to promote economic efficiency and low enough to 

prevent any one individual or entity from holding an excessive share. 

According to New Zealand fishery managers and experts, for example, 

accumulation limits were set at between 10 and 35 percent, depending on 

the species, in order to allow individuals to acquire enough quota to be 

efficient and competitive while also stemming overcapacity and 

overfishing in the inshore fisheries. Furthermore, as quota becomes more 

valuable, managers may face pressure from existing quota holders to raise 

or eliminate the limits on accumulation. In Iceland, for example, fishery 

managers recently increased accumulation limits from 8 percent to 12.5 

percent of the total quota because of such pressure. In cases where both 

communities and individuals hold quota, fishery managers may want to set 

different limits for communities and individuals. Even after managers set 

accumulation limits, monitoring and enforcing these limits could be more 

difficult when fishermen create subsidiaries and complicated business 

relationships that enable them to catch more than the quota limit for an 

individual quota holder. To mitigate this problem, the Alaskan halibut and 

sablefish program, for example, requires all quota transfer applicants to 

identify whether they are individuals or business entities, and requires all 

business entities to annually report their ownership interests. NMFS uses 

this information to ensure that no halibut and sablefish quota holdings, 

whether individually or collectively, exceed the accumulation limits. 

• Owner-on-board requirements. According to fishery experts we spoke 

with, requiring quota holders to be onboard their vessels could be 

impractical, especially for small businesses where the same person would 

have to be on board at all times. Furthermore, such a rule would require so 

many exceptions, such as for emergencies and illness, that it could 

become meaningless. 

• Requirements to bring catch into ports in a particular geographic area. 

These requirements may not be healthy for a community’s economy in the 

long term. For example, such a requirement may subsidize inefficient local 

fish processors that cannot compete on the open market. With reduced 
Page 20 GAO-04-277 Individual Fishing Quotas 

competition, these processors may offer less money for the catch, thus 

reducing the fishermen’s income and ultimately harming the community. 

According to Shetland Islands fishery managers we spoke with, had 

fishermen been required to land their catch in the Shetland Islands, they 

would have been forced to sell their catch at a price far below the market 

value and the processor would have had no incentive to restructure into 

the competitive business it is today. 

• Leasing provisions. According to some fishery managers and experts, 

leasing reduces stewardship incentives, which may impact the 

community’s long-term economic viability. Quota leasing separates the 

person holding the quota from the person fishing the quota. In some cases, 

quota leasing may diminish stewardship incentives by creating a class of 

absentee quota holders who rely on independent fishermen. While owneron-board rules, such as those in Alaska, may minimize the risk of creating 

this class of absentee quota holders, fishermen who lease quota have only 

a temporary privilege to catch fish. Thus, they have less interest in the 

long-term health of the fishery, especially as the end of their lease term 

approaches. Consequently, incentives may exist to catch more fish than 

their quota allows and sell this over-quota fish on the black market or to 

fish using nonsustainable methods. For example, according to New 

Zealand fishery experts, quota holders in the high-value abalone fishery 

found that unskilled fishermen who leased quota were jeopardizing the 

fish by extracting them in ways that harmed the abalone beds. 

Given the issues raised by quota transfer and other program rules, as well 

as the potential loss of economic efficiency resulting from these rules, 

some fishery managers and experts view freely transferable quota as being 

the best way to maintain economically viable communities and therefore 

place few or no restrictions on quota sales or leases. For example, New 

Zealand allows free trade in quota on the theory that free trade is needed 

to maximize returns from the fishery and enhance stewardship of the 

resource. Similarly, the surfclam/ocean quahog IFQ program has relatively 

few restrictions on quota transfers. 

As with community protection methods, new entry methods also present a 

variety of design and implementation challenges to fishery managers. 

Allowing quota to be transferred through sales or leases provides the 

opportunity for new entry but quota prices may increase over time, 

making quota less affordable. In the New Zealand IFQ program, for 

example, the average price per metric ton of rock lobster quota in one 

management area skyrocketed from NZ$23,265 to NZ$222,500 over an 8-

year period. 

New Entry Methods 

Present Design and 

Implementation 

Challenges 
Page 21 GAO-04-277 Individual Fishing Quotas 

While leasing helps make quota available at prices lower than the sales 

price, the lease price may still be unaffordable or unprofitable to fish and 

thus not practical for new entrants. For example, according to New 

Zealand fishing industry representatives, the lease price for rock lobster in 

2003 was about NZ$22.50 per kilo, but fishermen needed to sell the fish for 

at least NZ$30 per kilo to cover their costs.14 To minimize the risk 

associated with leasing, the Shetland Islands community quota program 

levied fees based on the sales revenue from the quota fished, rather than 

setting a fixed lease price that fishermen would have to pay, regardless of 

the amount of quota fish caught. 

Set-asides to make quota available for new entrants also raise challenges, 

according to fishery experts. In setting aside quota for new entrants, 

fishery managers have to decide how much quota to reserve and who 

would be eligible to receive it, such as owners of small boats or young 

fishermen. If a set-aside occurs when a program is first established, 

managers do not have to take quota away from existing quota holders. 

However, there are many challenges associated with setting aside quota 

after a program is implemented. 

• Buying back quota. Buying back quota may not be possible because the 

government may not find quota holders willing to sell their quota. For 

example, New Zealand funded a buyback program to obtain quota as part 

of its settlement with the Maori tribes. However, the government was not 

able to obtain the amount of quota it was seeking, and, as a result, had to 

give the tribes money in place of some of the quota. 

• Issuing quota for a fixed period of time. Issuing quota with expiration 

dates could make it less likely that fishermen would accept the IFQ system 

or make investments in efficiency. Fishermen could also find it difficult to 

invest in boats and gear because banks may be less willing to lend money 

and fishermen may be less willing to borrow. Furthermore, as with leasing, 

stewardship incentives could decline as the quota expiration date draws 

near. 

 14Rock lobster traditionally sells for high prices, particularly in the large Asian market. 

However, the Asian market price temporarily collapsed in 2003 when the Severe Acute 

Respiratory Syndrome epidemic broke out and fewer Asians were eating in restaurants. 
Page 22 GAO-04-277 Individual Fishing Quotas 

• Setting aside TAC increases. Replenishing quota by using TAC increases 

might not always be feasible because quota would not be available to 

reserve as a set-aside when the TAC remains the same or declines. Setting 

aside TAC increases would also dilute the interests of existing quota 

holders, who would hold a smaller percentage of the TAC. 

Fishery managers also face challenges in deciding which new entrants 

would be eligible to receive quota from the set-aside. If fishery managers 

decide to auction quota to the highest bidder, they cannot be assured that 

quota would be affordable to new entrants.15 Fishery managers could 

auction the quota in small amounts, which would make the quota more 

affordable and thereby open up opportunities to new entrants. However, 

the value of the quota would decrease to reflect the inherent inefficiency 

of this distribution mechanism. In addition, while lotteries could provide 

potential entrants an equal chance to obtain quota and resolve some of the 

equity issues raised by auctions, they would also create more uncertainty 

for existing quota holders. Current quota holders would no longer have 

control over quota purchases and would have to depend on the luck of the 

draw. This uncertainty is a disincentive to invest in boats or gear. 

Economic assistance methods are designed to provide new entrants with 

the capital needed to purchase quota and are the most direct method of 

helping new entrants. However, they raise the following concerns, 

according to fishery experts we spoke with: 

• The financial assistance may not be sufficient for a potential new entrant 

to enter the fishery or buy enough quota to earn a living. 

• Providing economic assistance could contribute to an increased demand 

for quota and further price increases, thereby defeating the primary 

purpose of trying to make quota more affordable. 

• Government entities may not be willing or able to fund economic 

assistance programs. 

 15As we noted previously, the Magnuson-Stevens Act’s limitation on fees may effectively 

preclude auctions. 
Page 23 GAO-04-277 Individual Fishing Quotas 

Fishery managers have not conducted comprehensive evaluations of how 

IFQ programs protect communities or facilitate new entry, because few 

IFQ programs were designed with community protection or new entry as 

objectives. This lack of information, combined with the concerns about 

economic efficiency and fairness, makes it more difficult to decide which 

community protection and new entry methods to use. In order to 

determine whether the chosen methods are working or how they should 

be improved, fishery managers would have to clearly define community 

protection or new entry as an objective, identify data that isolate the 

impact of community protection and new entry methods, collect these 

data before implementing the program—baseline data—and compare 

these data with data collected over the course of the program. This effort 

would then allow managers to determine whether their community 

protection or new entry methods are accomplishing their objectives and 

whether they need adjustments to promote effectiveness or respond to any 

unintended consequences. 

Under the Magnuson-Stevens Act, fishery managers are required to analyze 

the social and economic conditions of the fishery in developing fishery 

management plans.16 These data could be used as a baseline for the social 

and economic conditions in a fishing community. In addition to baseline 

data, fishery managers need to collect data once the IFQ program is 

established. For example, some fishery experts told us that many fishing 

communities in Iceland collapsed when quota was sold and left the 

community. However, other fishery experts and Icelandic officials said 

that these communities would have collapsed regardless of the IFQ, in 

part, due to the lack of educational and employment opportunities and the 

movement of people to Reykjavik, the capital, as the country modernized 

during this time period. This difference in opinion exists partly because 

Iceland did not collect the data needed to determine whether the IFQ 

program, or other factors, led to the communities’ demise. Recognizing the 

need for additional information, Alaskan fishery managers will collect data 

each year on the amount of halibut and sablefish quota held in each 

community to help assess the effectiveness of its recent amendment 

 16In particular, National Standard 8 of the Magnuson-Stevens Act, as amended by the 

Sustainable Fisheries Act, requires that fishery conservation and management measures 

take into account the importance of fishery resources to fishing communities in order to 

provide for the sustained participation of fishing communities, and to the extent 

practicable, minimize adverse economic impacts on fishing communities. A fishing 

community, in turn, is defined as one that is substantially dependent on or engaged in the 

harvesting or processing of fishery resources to meet social and economic needs. 

Evaluations of Community 

Protection and New Entry 

Methods Would Enable 

Managers to Determine 

Their Effectiveness 
Page 24 GAO-04-277 Individual Fishing Quotas 

allowing communities to purchase quota. Similar issues arise in trying to 

collect data that distinguishes new entrants from existing quota holders. 

Without the data to clearly understand the changes occurring in a fishery 

or community, fishery managers cannot effectively modify their 

community protection or new entry methods. 

During the moratorium on new IFQ programs in the United States, two 

fishery cooperatives, among others, emerged as an alternative fishery 

management approach—the Whiting Conservation Cooperative and the 

Pollock Conservation Cooperative. (See app. III for a description of each 

cooperative.) These cooperatives are voluntary contractual agreements 

among fishermen to apportion shares of the catch among themselves. In 

comparing the key features of IFQ programs and these U.S. fishery 

cooperatives, we identified the advantages and disadvantages of each 

approach in key areas. Given these differences, an IFQ program combined 

with some characteristics of a cooperative, such as provisions of New 

Zealand’s cooperative-like stakeholder organizations, may be beneficial. 

While both IFQ programs and fishery cooperatives can vary widely, the 

general characteristics of IFQ programs and fishery cooperatives differ in 

the areas of regulatory and management framework, number of 

participants, quota allocation and transfer, and monitoring and 

enforcement. (See table 1.) 

IFQ Programs and 

Fishery Cooperatives 

Have Advantages and 

Disadvantages 

IFQ Programs and Fishery 

Cooperatives Differ in 

Several Respects 
Page 25 GAO-04-277 Individual Fishing Quotas 

Table 1: Differences between U.S. IFQ Programs and Fishery Cooperatives in Key Areas 

Key areas IFQ programs Fishery cooperatives 

Regulatory and management framework • Established (and terminated) by 

regulations 

• Subject to fishery management council 

process 

• Established (and terminated) by 

voluntary contractual agreementsa

• Not subject to fishery management 

council process 

Number of participants • Number may be large • Number generally small 

Allocation and transfer of quota • NMFS allocates quota to eligible entities 

• Quota traded on the open market 

• New entry requirements established by 

regulation 

• NMFS allocates quota to cooperative, 

which, through negotiated contract, 

allocates quota among members 

• Quota traded only within the cooperative 

• New entry closed at cooperative’s 

discretion 

Monitoring and enforcement • NMFS monitors individual participants 

for compliance with individual TAC limits 

and other program rules 

• NMFS enforces 

• NMFS monitors cooperative for 

compliance with TAC limits 

• NMFS enforces 

• Cooperative monitors its members for 

compliance with individual TAC limits 

and contract terms 

• Cooperative members can bring legal 

action against another member for 

breach of contract 

Source: GAO’s analysis. 

a

Certain aspects of the pollock cooperative are governed by the American Fisheries Act. For specific 

information on the whiting and pollock cooperatives, see appendix III. 

With respect to their regulatory and management framework and number 

of participants, IFQ programs generally have greater stability, take longer 

to establish, and manage larger numbers of participants than cooperatives. 

IFQ programs have greater stability than fishery cooperatives because 

they are established and terminated by federal regulations, while 

cooperatives are established and terminated by voluntary contractual 

agreements. 

IFQ programs generally take longer to establish than fishery cooperatives 

because of the fishery management council process. Fishery councils must 

review the IFQ proposal, develop alternatives and options, and analyze 

their potential social and economic effects before submitting the proposal 

to the Secretary of Commerce for approval. While the secretary is 

reviewing the proposal, NMFS must publish draft regulations for public 

comment before the secretary makes a final decision and the regulations 

are implemented. This process can be quite lengthy; for example, it took 3 

years for the North Pacific Council to review, analyze, and adopt the 

proposed Alaskan halibut and sablefish IFQ program and another 3 years 
Page 26 GAO-04-277 Individual Fishing Quotas 

to implement the program. In comparison, because fishery cooperatives 

are voluntary, agreements can be reached within a shorter period of time. 

For example, the contract to form the whiting cooperative was negotiated 

in less than a day. 

Finally, IFQ programs can manage larger numbers of diverse participants. 

At the end of 2002, for example, the Alaskan halibut and sablefish IFQ 

program had about 3,500 participants, ranging from crewmembers on 

small boats to owners of large freezer vessels. In contrast, according to 

fishery experts, fishery cooperatives work better with fewer and relatively 

homogeneous participants because it is difficult for members to reach 

agreement where there are many participants with diverse interests. For 

example, the whiting cooperative has four participants and the pollock 

cooperative has eight participants.17 In both cooperatives, the participants 

are large harvesting and processing companies that own catcher-processor 

vessels.18

With respect to allocating and transferring fishing privileges, IFQ programs 

provide greater transparency than fishery cooperatives. Under an IFQ 

program, NMFS uses widely published criteria established by fishery 

councils to allocate quota to individual entities, such as individual 

fishermen or fishing firms. Under a fishery cooperative, NMFS allocates 

quota to the cooperative, which, through negotiated contract, distributes 

the quota among its members. For example, the four companies that 

operated catcher-processor vessels in the Pacific whiting fishery 

negotiated a private contract to divide up the sector’s quota using catch 

history, vessel capacity, and number of vessels. 

When quota can be transferred, IFQ programs are less exclusive than 

cooperatives, because they provide entry opportunities for fishermen who 

can find and afford to buy or lease quota. In comparison, cooperatives are 

exclusive contractual arrangements where quota is transferred among the 

members, and potential entrants may have difficulty entering the 

cooperative. 

 17Nine companies formed the Pollock Conservation Cooperative. One company later 

transferred its allocation to other member companies. 

18Some cooperatives have more participants. In 2002, for example, 77 permit holders in the 

state of Alaska’s Chignik salmon purse seine fishery joined a cooperative to fish sockeye 

salmon. 
Page 27 GAO-04-277 Individual Fishing Quotas 

Finally, regarding monitoring and enforcement, IFQ programs are viewed 

as being more difficult for NMFS to administer than fishery cooperatives, 

because NMFS must monitor individual participants for compliance with 

program rules, such as quota accumulation and catch limits. In contrast, 

cooperatives are viewed as being simpler for NMFS to monitor and 

enforce, because NMFS monitors one entity—the cooperative—and the 

cooperative is responsible for monitoring the actions of its members. 

For some fisheries, establishing a cooperative of quota holders within the 

overall framework of an IFQ program to help manage fishing may 

maximize the benefits of IFQ programs and fishery cooperatives while 

minimizing their downsides. Some of the benefits of a combined 

IFQ/cooperative approach are illustrated in the examples below, where 

groups of New Zealand quota holders formed cooperative-like 

organizations to help manage their fisheries, such as abalone, hoki, orange 

roughy, scallops, and rock lobster. 

With respect to regulatory and management framework and number of 

participants, a cooperative of IFQ holders offers the following advantages: 

• A combined approach provides the stability of an IFQ program. Because 

the IFQ program is set by regulations, it will remain in place even if the 

cooperative dissolves. Also, should the cooperative fail to perform, its 

management authority and responsibilities would revert to the 

government. For example, according to New Zealand fishery managers we 

spoke with, the Challenger Scallop Enhancement Company (Scallop 

Company) has managed the scallop fisheries effectively, but should it fail 

to perform, its responsibilities would return to the government. 

• A combined approach can provide a way for large numbers of participants 

to organize into smaller groups to help manage their fisheries collectively. 

For example, New Zealand’s rock lobster IFQ quota holders formed nine 

regional cooperative groups under the umbrella of the New Zealand Rock 

Lobster Industry Council. The council and the regional groups provide 

advice on management of rock lobster fisheries. 

• A combined approach can provide the opportunity for fishery participants 

to pool information, assess stocks, achieve economies of scale in 

production and try other forms of cooperation. For example, a cooperative 

of quota holders could decide to pool their quota and fish in more 

economical ways, such as having only certain members fish and then 

distributing the proceeds among all members. Similarly, a cooperative of 

A Combined Approach 

May Provide Benefits in 

Some Cases 
Page 28 GAO-04-277 Individual Fishing Quotas 

quota holders could agree to stop fishing in certain areas or leave some of 

the quota unfished to protect the resource. In New Zealand, for example, 

abalone quota holders agreed not to fish some of their quota, because they 

believed that the TAC had been set too high. 

In terms of allocating and transferring fishing privileges, a combined 

approach offers the following advantages: 

• Under a combined approach, the fishery council, rather than the 

cooperative, could make the difficult and often contentious decisions 

regarding who can hold quota and how much quota an individual receives. 

• A combined approach would also provide transparency, because the IFQ 

program’s quota allocation and transfer rules could be used to allocate 

quota to members of the cooperative. 

• Fishery managers could reduce the exclusivity of a cooperative by 

requiring that the cooperative give each new quota holder the opportunity 

to join. For example, membership in New Zealand’s stakeholder 

organizations is open to any entity that holds quota in the particular 

fishery.19 Moreover, quota allocations are not lost if a cooperative of quota 

holders dissolves, because each member retains the quota allocated under 

the IFQ program. 

In terms of monitoring and enforcement, under a combined approach, the 

government could give some management responsibilities to the 

cooperative, such as monitoring the actions of individual members for 

compliance with certain program rules. New Zealand officials told us that 

their government reduced its monitoring costs for its scallop fisheries 

because the Scallop Company now performs this function. Because of the 

size and common interests of cooperatives, members often create peer 

pressure to conform to program rules. Self-regulation might also decrease 

overall enforcement costs. Finally, a combined approach would provide 

the enforcement mechanisms of an IFQ program should self-regulation fail 

and/or should the cooperative fail to perform its other management 

responsibilities. New Zealand, for example, devolved most IFQ 

management responsibilities to the Scallop Company, but the government 

has not lost its management authority. 

 19These organizations can also have members who do not hold quota, such as fish 

processors and exporters. 
Page 29 GAO-04-277 Individual Fishing Quotas 

No method will protect communities or facilitate new entry if the fishery 

collapses. While an IFQ is a fishery management tool put in place to 

protect the resource, as well as reduce overcapacity, these laudable goals 

may have unintended consequences: the loss of communities historically 

engaged in or reliant on fishing and reduced participation opportunities 

for entry-level fishermen or fishermen who did not qualify for quota under 

the initial allocation. New IFQ programs or modifications to existing 

programs may be designed to address these problems by incorporating 

community protection and new entry goals. However, because the goals of 

community protection and new entry run counter to the economic 

efficiency goals, fishery councils face a delicate balancing act to achieve 

all goals. It is therefore critically important for fishery councils to tailor 

IFQ programs to achieve efficiency and conservation as well as social 

objectives. However, without collecting and analyzing data on the 

effectiveness of the approaches used, fishery councils will not know if the 

program is meeting its intended goals and if mid-course adjustments need 

to be made. 

To protect fishing communities and facilitate new entry into new or 

existing IFQ fisheries, we recommend that the Director of the National 

Marine Fisheries Service ensure that regional fishery management 

councils that are designing community protection and new entry methods 

take the following three actions: 

• Develop clearly defined and measurable community protection and new 

entry objectives. 

• Build performance measures into the design of the IFQ program. 

• Monitor progress in meeting the community protection and new entry 

objectives. 

We provided a draft of this report to the Department of Commerce for 

review and comment. We received a written response from the Under 

Secretary of Commerce for Oceans and Atmosphere that included 

comments from the National Oceanic and Atmospheric Administration 

(NOAA). NOAA stated that our report was a fair and thorough assessment 

of community protection and new entry issues in IFQ programs. NOAA 

generally agreed with the report’s accuracy and conclusions and agreed 

with the substance of the report’s recommendations. NOAA’s comments 

and our detailed responses are presented in appendix IV of this report. 

Conclusions 

Recommendations for 

Executive Action 

Agency Comments 

and Our Evaluation 
Page 30 GAO-04-277 Individual Fishing Quotas 

NOAA indicated that it currently does not have the authority to direct the 

councils to adopt the report’s recommendations, because it cannot direct 

councils to take actions that are not mandated by the Magnuson-Stevens 

Act. We have revised our recommendations accordingly. However, NOAA 

agreed with our recommendation to develop clearly defined and 

measurable community protection and new entry objectives. NOAA noted 

that clearly defined and measurable objectives are often hard to identify, 

objectives may vary by IFQ program, and measurable objectives require 

data that are not always available or regularly collected. Nonetheless, it 

recognized that management objectives are important and should be used 

as much as possible as yardsticks in developing IFQ programs. NOAA 

agreed with our recommendation to build performance measures into the 

design of the IFQ program, noting the importance of selecting feasible and 

appropriate performance measures. Finally, NOAA agreed with our 

recommendation to monitor progress in meeting the community 

protection and new entry objectives. NOAA wrote that provisions for the 

monitoring and review of new IFQ program operations are addressed in 

the administration’s Magnuson-Stevens Act reauthorization proposal. 

NOAA also provided technical comments that we incorporated in the 

report as appropriate. 

We are sending copies of this report to the Secretary of Commerce and the 

Director of the National Marine Fisheries Service. We will also provide 

copies to others upon request. In addition, the report will be available at 

no charge on the GAO Web site at http://www.gao.gov. 

If you or your staff have any questions about this report, please call me at 

(202) 512-3841 or Keith Oleson at (415) 904-2218. Key contributors to this 

report are listed in appendix V. 

Anu K. Mittal 

Director, Natural Resources 

 and Environment 
Appendix I: Scope and Methodology 

Page 31 GAO-04-277 Individual Fishing Quotas 

This is the second in a series of reports on individual fishing quota (IFQ) 

programs. For this report, we reviewed foreign and domestic quota 

programs and fishery cooperatives to determine (1) the methods available 

for protecting the economic viability of fishing communities and 

facilitating new entry into IFQ fisheries, (2) the key issues raised by 

community protection and new entry methods, and (3) the comparative 

advantages and disadvantages of the IFQ system and the fishery 

cooperative approach. 

For all three objectives, we visited Iceland, New Zealand, Scotland’s 

Shetland Islands, and Alaska and Maine in the United States, where we 

interviewed fishery management officials, quota program participants, 

researchers, and industry and community representatives and visited 

fishing communities. We also visited the fishing communities of Kodiak 

and Old Harbor, Alaska; and Jonesport, Portland, Stonington, and 

Vinalhaven, Maine. In these communities, we interviewed fishery 

participants, local government officials, and community representatives, 

and visited fishing and fishing-related businesses. We selected these 

countries and U.S. fishing communities in accordance with suggestions 

from program managers and industry experts to obtain coverage of a 

range of quota-based programs and fishing communities. We also reviewed 

the literature on IFQ and other quota-based programs and fishery 

cooperatives. 

To determine the methods available for protecting the economic viability 

of fishing communities and facilitating new entry into IFQ fisheries and 

the potential limitations of each method, we identified foreign and 

domestic programs with community protection or new entry provisions. 

We interviewed and obtained the views of foreign and domestic fishery 

management officials, program participants, researchers, and industry and 

community representatives on methods that are being used or could be 

used to protect communities and facilitate new entry, as well as the 

potential benefits and limitations of each method. We also searched for, 

but could not find, any studies and assessments of the extent to which 

each program has met its community protection or new entry objectives. 

To determine the comparative advantages and disadvantages of the IFQ 

system and the fishery cooperative approach, we identified and reviewed 

fishery management plans, laws, and regulations related to existing IFQ 

and fishery cooperative programs. We also reviewed and analyzed studies 

and assessments of these programs and interviewed foreign and domestic 

fishery management officials, researchers, and industry representatives on 

the comparative benefits and downsides of each approach. 

Appendix I: Scope and Methodology 
Appendix I: Scope and Methodology 

Page 32 GAO-04-277 Individual Fishing Quotas 

We conducted our review from February through October 2003 in 

accordance with generally accepted government auditing standards. 
Appendix II: Descriptions of Selected 

Individual Fishing Quota (IFQ) Programs 

Page 33 GAO-04-277 Individual Fishing Quotas 

This appendix describes IFQ programs in Iceland, New Zealand, and 

Scotland’s Shetland Islands, as well as the U.S. Mid-Atlantic 

surfclam/ocean quahog IFQ program and the U.S. Alaskan halibut and 

sablefish IFQ program. The term individual fishing quota as used in this 

report includes individual transferable quota (ITQ) and individual vessel 

quota (IVQ). 

Iceland’s economy depends heavily on the fishing industry, which provides 

70 percent of export earnings and employs 12 percent of the work force. 

Iceland excluded foreign fishermen from its waters in the 1970s, when it 

introduced its exclusive economic zone. Nevertheless, cod, Iceland’s main 

commercial fish stock, had collapsed and other essential stocks were 

reported to be near collapse by the 1980s. 

In 1984, Iceland introduced individual fishing quotas for its major fisheries. 

Fishermen indirectly hold quota in Iceland because Iceland’s individual 

fishing quotas are linked to fishing vessels rather than persons. In 1990, 

Iceland allowed quota to be sold and leased, transforming IFQs into 

individual transferable fishing quota. According to fishery experts and 

managers, the fish in Iceland are property of the Icelandic people rather 

than individual quota holders. As such, quota allocations are indefinite in 

duration and could be revoked by the Icelandic Parliament at any time. 

While not explicitly designed with such objectives, Iceland’s IFQ program 

used the following provisions to protect communities and encourage new 

entry: 

• Community right of first refusal. This rule provides communities with 

the right to veto the transfer of fishing vessels and associated quota to 

someone outside of the community. To stop the sale, the community must 

purchase the vessel at the market rate. 

• Emergency community quota allocations. Iceland allocates small blocks 

of quota to communities hurt by the transfer of quota from their area. 

• Separate quota markets for large and small vessels. To help protect small 

vessels, Iceland divided its IFQ system into two quota markets—one for 

large vessels and another for small vessels. Quota allocated to small 

vessels cannot be transferred to large vessels, and quota allocated to large 

vessels cannot be transferred to small vessels. Also, small-vessel 

fishermen can choose to fish a pre-set number of fishing days (days-atsea), instead of participating in the IFQ system. 

Appendix II: Descriptions of Selected 

Individual Fishing Quota (IFQ) Programs 

Iceland 
Appendix II: Descriptions of Selected 

Individual Fishing Quota (IFQ) Programs 

Page 34 GAO-04-277 Individual Fishing Quotas 

Seafood is New Zealand’s fourth largest export, after dairy, meat, and 

forestry. In 2000, seafood exports were worth about NZ$1.43 billion and 

accounted for 90 percent of industry revenue. 

New Zealand introduced individual fishing quotas in 1986 for some of the 

most economically significant species to prevent overfishing in the inshore 

fisheries while developing the unexplored deepwater fisheries. Under the 

resulting quota management system, New Zealand manages about 50 

species, such as hoki, orange roughy, and scallops. New Zealand’s IFQ fish 

accounted for about 95 percent of the fishing industry’s value in 2003. 

New Zealand’s system allows fishermen to buy or sell quota, as well as 

lease quota on an annual basis.1

 Fishery managers initially established 

quota accumulation limits for the inshore and deepwater fisheries. 

Furthermore, the allocation of quota changed from weight to a percentage 

of the total allowable commercial catch in 1990. 

According to New Zealand fishery managers, community protection was 

not an objective of the quota management system, and New Zealand has 

few fishing-dependent communities. However, the New Zealand 

government allocated quota to the indigenous Maori tribes as part of the 

settlement agreements resolving claims of ownership of the fisheries 

under the Treaty of Waitangi Fisheries Commission. The commission is 

leasing quota to fishermen while it develops a formula to distribute quota 

to the Maori. Key barriers to reaching agreement on this distribution 

formula include identifying membership in tribes and agreeing on how 

much quota each tribe should receive. 

In recent years, groups of quota holders have joined together in 

cooperative-like organizations to help manage some of the fish stocks 

under the quota management system. This co-management by government 

and industry has led to the formation of key stakeholder groups in 

fisheries such as hoki, orange roughy, rock lobster, and scallops. 

Fishing is integral to the economy and culture of Scotland’s Shetland 

Islands. In 1999, the value of the Shetland Islands’ fishing industry 

accounted for approximately one-fifth of the Shetland Islands’ economy 

 1

New Zealand allows individuals to buy or sell an annual catch entitlement (ACE). This 

trading of ACE is theoretically equivalent to leasing quota for 1 year. 

New Zealand 

Shetland Islands, Scotland 

(United Kingdom) 
Appendix II: Descriptions of Selected 

Individual Fishing Quota (IFQ) Programs 

Page 35 GAO-04-277 Individual Fishing Quotas 

and provided over 2,500 jobs. As part of the United Kingdom, Scotland is 

party to the Common Fisheries Policy of the European Union. The United 

Kingdom receives catch quotas for each species from the European Union 

and then allocates portions of these quotas to groups of fishermen known 

as producer organizations, such as the Shetland Fish Producers 

Organization. The United Kingdom manages quotas under a fixed quota 

allocation, an individual fishing quota that, in practice, allows quota 

trades. 

In the 1990s, because of concerns about high quota prices and foreigners 

holding local quota, the Shetland Islands’ fishing industry developed the 

Shetland Community Fish Quota scheme to protect its fishermen.2

 The 

Shetland Fish Producers Organization created and manages two pools of 

quota for Shetland Islands fishermen, one for member fishermen and one 

for new entrants. Using oil settlement monies, the local government 

purchased quota for the community fish quota pool. This quota pool is 

available to those who have no quota as well as those who need additional 

quota to participate in the fishery. In 2002, 13 vessels used the pool, more 

than half receiving their entire quota from the pool. The producers 

organization charges a fee based on gross earnings rather than a fixedterm lease. Thus, new entrants are charged only for fish landed and are not 

penalized for leasing quota they cannot fish. The fee is based on the ratio 

of quota held to quota borrowed. Table 2 shows how this fee is charged. 

Table 2: Leasing Fees under the Shetland Community Fish Quota Scheme 

Percent of quota 

borrowed 

Percent of quota 

already held

Fee charged 

(based on revenues from landings) 

100 0 6.0% of all landings 

80 20 4.8% on 80% of the landings 

50 50 3.0% on 50% of the landings 

20 80 1.2% on 20% of the landings 

Source: GAO analysis of Shetland Fish Producers’ Organization data. 

 2

The European Union found that parts of this scheme were noncompliant, largely because 

it gives preferential treatment to Shetland fishermen. Fishery managers are currently 

working to modify the scheme in order to continue community ownership of quota. 
Appendix II: Descriptions of Selected 

Individual Fishing Quota (IFQ) Programs 

Page 36 GAO-04-277 Individual Fishing Quotas 

The surfclam/ocean quahog fishery is a small, industrialized fishery 

primarily located in the waters from Maine to Virginia, with commercial 

concentrations found off the Mid-Atlantic states. The ocean quahog fishery 

arose as a substitute for surfclams when the surfclam fishery declined in 

the mid 1970s. While ocean quahogs are found further off shore than 

surfclams, the same vessels are largely used in each fishery. The surfclam 

fishery developed after World War II and was being overfished by the mid 

1970s. Disease and industry overfishing led the Mid-Atlantic Fishery 

Management Council to develop a plan to manage the fishery. The 

surfclam/ocean quahog fishery consists of small, independent fishermen 

and vertically integrated companies. 

Individual fishing quotas were established for the surfclam/ocean quahog 

fishery in 1990; it was the first IFQ program in the United States. The 

program was not designed nor does it have specific objectives aimed at 

protecting fishing communities or facilitating new entry; rather, it was 

designed to help stabilize the fishery and reduce excessive investment in 

fishing capacity. The program included no specific and measurable limits 

on how much quota an individual could accumulate. However, allowing 

quota to be sold and leased provides the opportunity for entry into the 

fishery. 

The Pacific halibut and sablefish fisheries are located off the coast of 

Alaska. The fishing fleets are primarily owner-operated vessels of various 

lengths that use hook and line or pot (fish trap) gear. Some vessels catch 

both halibut and sablefish, and, given the location of both species, they are 

often caught as incidental catch of one another. Overcapacity of fishing 

effort led to fishing seasons that lasted less than 3 days and a race to catch 

fish. 

The Alaskan halibut and sablefish IFQ program was implemented in 1995, 

shortly before Congress placed a moratorium on new IFQ programs. The 

program was designed, in part, to help improve safety for fishermen, 

enhance efficiency, and reduce excessive investment in fishing capacity. 

The IFQ program includes the following community protection or new 

entry provisions: 

• Community quota. When the program was implemented, the council set 

aside quota for a community development program to develop fishing and 

fishing-related activities in villages in western Alaska. In 2002, the council 

amended the IFQ program to allow certain Gulf of Alaska coastal 

communities to buy Alaskan halibut and sablefish quota. 

U.S. Mid-Atlantic 

Surfclam/Ocean Quahog 

IFQ Program 

U.S. Alaskan Halibut and 

Sablefish IFQ Program 
Appendix II: Descriptions of Selected 

Individual Fishing Quota (IFQ) Programs 

Page 37 GAO-04-277 Individual Fishing Quotas 

• Accumulation limits. The North Pacific Council adopted accumulation 

limits ranging from 0.5 percent to 1.5 percent, depending on the fishing 

area, to help protect the fisheries’ owner-operator fleet, which operates 

out of smaller communities. 

• Vessel categories. The quota for each person eligible to receive quota was 

permanently assigned to one of four vessel categories based on vessel type 

and length. 

• Quota blocks. The council permanently placed small amounts of quota in 

blocks, in part, to help make quota available and affordable for entry-level 

fishermen. Large amounts of quota remained unblocked. Blocks can only 

be bought or transferred in their entirety. An individual can hold two quota 

blocks; an individual who holds any amount of unblocked quota can only 

hold one quota block. 

• Crew consideration. Eligibility to obtain most quota by transfer is limited 

to those who have 150 days of experience participating in any U.S. fishery. 
Appendix III: Descriptions of Selected U.S. 

Fishery Cooperatives 

Page 38 GAO-04-277 Individual Fishing Quotas 

A fishery cooperative is a group of fishermen who agree to work together 

for their mutual benefit. Two fishery cooperatives emerged as an 

alternative to IFQ programs in U.S. federal waters: (1) the Whiting 

Conservation Cooperative, established in 1997 and (2) the Bering Sea 

Pollock Conservation Cooperative, established in 1998. These 

cooperatives are voluntary contractual agreements among fishermen to 

apportion shares of the catch among themselves. Fishery cooperatives 

operate under the Fishermen’s Collective Marketing Act of 1934 (15 U.S.C. 

§ 521), which provides an antitrust exemption to fishermen, allowing them 

to jointly harvest, market, and price their product. 

The Pacific whiting fishery, located off the coasts of Washington, Oregon, 

and California, is under the jurisdiction of the Pacific Fishery Management 

Council. Whiting is harvested using mid-water trawl nets (cone-shaped 

nets towed behind a vessel) and primarily processed into surimi. The 

council has divided the Pacific whiting total allowable catch (TAC) among 

three sectors—vessels that deliver to onshore processors, vessels that 

deliver to processing vessels, and vessels that catch and also process. 

In the 1990s, the fishery was overcapitalized and fishing companies were 

engaged in a race for fish. In 1997, four companies operating the 10 

catcher-processor vessels in the fishery voluntarily formed the Whiting 

Conservation Cooperative, which is organized as a nonprofit corporation 

under the laws of the state of Washington. The overall purposes of the 

cooperative are to (1) promote the intelligent and orderly harvest of 

whiting, (2) reduce waste and improve resource utilization, and (3) reduce 

incidental catch of species other than whiting. The specific goals are to (1) 

eliminate the race for fish and increase efficiency, (2) improve the 

efficiency of the harvest by using an independent monitoring service and 

sharing catch and incidental catch information, and (3) conduct and fund 

research for resource conservation. The cooperative is not involved in 

matters relating to pricing or marketing of whiting products. 

The cooperative’s contract allocates the Pacific whiting TAC for the 

catcher-processor sector among the cooperative’s members, who agree to 

limit their individual harvests to a specific percentage of the TAC. Once 

individual allocations are made, the contract allows for quota transfers 

among member companies. To monitor the catch, the contract requires the 

members to maintain full-time federal observers on their vessels. Member 

companies bear the cost of observer coverage. The contract also requires 

members to report catches to a private centralized monitoring service. To 

Appendix III: Descriptions of Selected U.S. 

Fishery Cooperatives 

Whiting Conservation 

Cooperative 
Appendix III: Descriptions of Selected U.S. 

Fishery Cooperatives 

Page 39 GAO-04-277 Individual Fishing Quotas 

ensure compliance, the contract contains substantial financial penalties 

for members exceeding their share of the quota. 

The pollock fishery off the coast of Alaska is the largest U.S. fishery by 

volume. The fishery is under the jurisdiction of the North Pacific Fishery 

Management Council, which sets the TAC each year. About 5 percent of 

the TAC is held in reserve to allow for the incidental taking of pollock by 

other fisheries, 10 percent is allocated to Alaska’s community development 

quota program, and the remainder, called the directed fishing allowance, is 

allocated to the pollock fishery. Like whiting, pollock is harvested using 

mid-water trawl nets. Pollock swim in large, tightly packed schools and do 

not co-mingle with other fish species. Pollock are primarily processed into 

surimi and fillets. In the 1990s, the Bering Sea pollock fishery was severely 

overcapitalized, producing a race for fish. As a result, the fishing season 

was reduced from 12 months in 1990 to 3 months in 1998. 

The fishery is composed of three sectors—inshore, offshore catcherprocessor, and offshore mothership (large processing vessel).1

 The 

American Fisheries Act2

 statutorily allocated the pollock fishery TAC 

among these three sectors and specified the eligible participants in each 

sector.3

 The nine companies that operated the 20 qualified catcherprocessor vessels formed the Pollock Conservation Cooperative in 

December 1998.4

 The purpose of the cooperative was to end the race for 

fish. 

Under the cooperative’s agreement, members limit their individual catches 

to a specific percentage of the total allowable catch allocated to their 

sector. Once the catch is allocated, members can freely transfer their 

 1

The inshore sector is comprised of catcher vessels harvesting pollock for processing 

plants located on or near the shore. The offshore catcher-processor sector is comprised of 

catcher-processor vessels (vessels that both catch and process pollock) and catcher 

vessels catching pollock for processing by catcher-processors. The offshore mothership 

sector consists of catcher vessels harvesting pollock for processing by motherships (large 

vessels that process but do not catch fish). 

2

Pub. L. No. 105-277, Division C, tit. II (1998). 

3

The inshore sector received 50 percent of the directed fishing allowance; the offshore 

catcher-processor sector received 40 percent; and the offshore mothership sector received 

10 percent. 

4

Four of the companies are also members of the Whiting Conservation Cooperative. 

Pollock Conservation 

Cooperative 
Appendix III: Descriptions of Selected U.S. 

Fishery Cooperatives 

Page 40 GAO-04-277 Individual Fishing Quotas 

quota to other members. The American Fisheries Act requires each 

catcher-processor vessel to have two federal observers on board at all 

times. Member companies bear the cost of observer coverage on their 

vessels. A private sector firm also tracks daily catch and incidental catch 

data to ensure that each member stays within its agreed upon harvest 

limits. To ensure compliance, the contract contains substantial financial 

penalties for members exceeding their share of the quota. The cooperative 

is not involved in matters relating to pricing or marketing of pollock 

products. 

In addition to operating under the terms of the cooperative’s contract, 

members of the cooperative must conduct fishing activities in compliance 

with certain NMFS and council requirements. Specifically, NMFS is 

responsible for closing the fishery when the sectoral allocation is reached. 

NMFS and the council set the season, impose restrictions against fishing in 

certain areas and at certain times, and set incidental catch limits for other 

species. 
Appendix IV: Comments from the Department 

of Commerce 

Page 41 GAO-04-277 Individual Fishing Quotas 

Appendix IV: Comments from the 

Department of Commerce 

Note: GAO comments 

supplementing those in 

the report text appear at 

the end of this appendix. 
Appendix IV: Comments from the Department 

of Commerce 

Page 42 GAO-04-277 Individual Fishing Quotas 
Appendix IV: Comments from the Department 

of Commerce 

Page 43 GAO-04-277 Individual Fishing Quotas 

See comment 4. 

See comment 3. 

See comment 2. 

See comment 1. 
Appendix IV: Comments from the Department 

of Commerce 

Page 44 GAO-04-277 Individual Fishing Quotas 
Appendix IV: Comments from the Department 

of Commerce 

Page 45 GAO-04-277 Individual Fishing Quotas 

The following are GAO’s comments on NOAA’s written comments 

provided by the Under Secretary of Commerce for Oceans and 

Atmosphere’s letter dated February 6, 2004. 

1. The report provided examples of National Standards relating to issues 

discussed in the report (overfishing, equity, efficiency, community 

protection, and new entry). We did not include National Standards 

relating to cost minimization, by-catch, and safety-at-sea, because we 

did not discuss these issues in the report. 

2. We revised the text to make it clear that we were providing examples 

of commercial fisheries where new IFQ programs were being 

considered. 

3. We revised the text to reflect that the halibut season was increased to 

8 months. 

4. We deleted the footnote relating to the uniqueness of Alaska, which is 

regulated by the North Pacific Council, from states covered by the 

other fishery councils, which regulate fisheries in multiple states. 

GAO Comments 
Appendix V: GAO Contact and Staff 

Acknowledgments 

Page 46 GAO-04-277 Individual Fishing Quotas 

Keith W. Oleson, (415) 904-2218 

In addition to those named above, Doreen S. Feldman, John S. Kalmar, Jr., 

Susan J. Malone, Mark R. Metcalfe, Carol Herrnstadt Shulman, and Tama 

R. Weinberg made key contributions to this report. 

Appendix V: GAO Contact and Staff 

Acknowledgments 

GAO Contact 

Staff 

Acknowledgments 

(360297) 
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