Aquaculture is defined as the production of any plant or animal in water and under controlled conditions. In the United States, aquaculture is a relatively new but rapidly growing industry. The value of U.S. aquaculture production more than quadrupled during the 1980s. Salmon is one of the four principal aquaculture products in the United States. Salmon farming operations begin in fresh water facilities, where ready-to-spawn broodstock or parent fish are stripped of eggs and sperm. The fertilized eggs are held in fresh water containers for about 2 months until they hatch. The hatchlings or fry are then raised in tanks from 4 to 15 months until they reach smolt stage, at which time they are capable of adapting to a salt water environment. Once the salmon reach this stage, they are transported to salt water net pens to begin the “grow out” phase. Depending on the species or variety of salmon, the fish are ready to be marketed for human consumption between 9 months and 2 years from the time they are placed in the pens. Farmed salmon production worldwide has increased from about 48,000 metric tons in 1985 to 331,000 metric tons in 1992. This increase in farmed production has transformed the international market for salmon. Currently, farmed salmon represents about 27 percent of the salmon brought to market worldwide. The principal international producers of farmed salmon are Norway, Chile, the United Kingdom, and Canada. Relative to these countries the United States is a minor producer, accounting for about 4 percent of total world production. U.S. production of farmed salmon is concentrated almost entirely in Maine and Washington State. In 1992, domestic farmed salmon production was about 12,000 metric tons, with Washington State accounting for approximately 40 percent of the total. U.S. production is expected to reach nearly 17,000 metric tons in 1995. Domestic production supplies approximately 23 percent of total U.S. consumption. Salmon farming in Washington State is a $40 million a year industry. There are about 18 salmon farming operations in Washington State. Some of these are only involved in raising salmon for human consumption, while others run hatcheries that produce fertilized eggs and smolts. According to Washington State producers, they have developed a market niche in the production of quality fertilized salmon eggs, which are then exported to such countries as Chile, Japan, and Canada. Canada is the principal supplier of farmed salmon to the United States. In 1992, Canadian exports, mainly from British Columbia, accounted for 44 percent of U.S. farmed salmon consumption. Canada exports about 75 percent of its total farmed salmon production to the United States. In 1992, Canada produced 29,500 metric tons of salmon with an estimated Canadian value of $200 million. British Columbia accounted for about 66 percent of total Canadian production. The province of New Brunswick, on the Atlantic coast, is the other major Canadian producer of farmed salmon. The salmon farming industry in British Columbia has grown dramatically in recent years. There are now approximately 100 salmon farming operations in British Columbia, producing about three times as much salmon as Washington State. According to industry spokesmen in British Columbia, while domestic hatcheries supply most of the fertilized eggs needed by the province’s salmon farms, there is still room in the market for imported eggs. As the industry has expanded, British Columbian salmon farmers have shifted production from various native Pacific salmon species, such as Coho or Chinook, to Atlantic salmon. In fact, Atlantic salmon has become the preferred species for aquaculture production around the world because it is less vulnerable to certain pathogens and has a lower feed-to-body-weight ratio than Pacific salmon varieties. To ascertain Canada’s restrictions on imports of salmon eggs and smolts into British Columbia, we reviewed the various policies implemented since 1985 and clarified key elements of these policies with officials from DFO; the British Columbian Ministry of Environment, Lands and Parks; and the Ministry of Agriculture, Fisheries and Food. To gain an understanding of the rationale for these policies, we obtained and reviewed documents provided by DFO, and we discussed the basis for these policies with DFO and British Columbian officials. To obtain industry views concerning the implementation and impact of the Canadian policy, we met with representatives of the British Columbia Salmon Farmers Association and the Washington Fish Growers Association. We also discussed the basis for the Canadian requirements with officials from the U.S. Fish and Wildlife Service, the National Marine Fisheries Service, and the Department of Agriculture’s Office of Aquaculture as well as its Animal and Plant Health Inspection Service. We also discussed technical aspects of the Canadian policy with researchers from the University of Washington’s School of Fisheries, the National Biological Survey, and Washington State’s Department of Fisheries. In addition, we met with officials from the Office of the U.S. Trade Representative to obtain their views regarding the international trade ramifications of the Canadian policy. To determine what opportunities existed for U.S. producers to increase exports of salmon eggs and smolts to British Columbia, we interviewed representatives of the Washington Fish Growers Association and major Washington State exporters of fertilized salmon eggs and smolts. In addition, we obtained the views of the British Columbia Salmon Farmers Association and of spokespersons for two leading British Columbian salmon producers. Because the Census Bureau does not collect data on exports of fertilized salmon eggs and smolts by using a distinct tariff code, we were unable to obtain official figures on the level of exports of these commodities. Nevertheless, by directly contacting major exporters in Washington State, we were able to obtain some data on exports of fertilized salmon eggs and smolts. However, because of the proprietary nature of these data and producers’ concerns about confidentiality, we were unable to report the level of exports to specific countries or regions, including British Columbia. Further, Washington State and British Columbian producers were unable to provide us with definitive data on the production costs of salmon eggs and smolts. In February and March 1995, we obtained oral comments from the director of DFO’s Aquaculture and Habitat Science Branch and the National Aquaculture Coordinator of the Department of the Interior’s Fish and Wildlife Service. Their comments are discussed at the end of this letter. We conducted our work from June 1994 to February 1995 in accordance with generally accepted government auditing standards. Since 1985, DFO, in coordination with the British Columbian Ministry of Environment, Lands and Parks, has required extended quarantine for imports of fertilized Atlantic salmon eggs. Further, DFO has banned all imports of Atlantic salmon smolts. This policy was established to protect the province’s valuable wild and cultured salmonid stocks from inadvertent contamination by pathogens that might be introduced with imported fish eggs or live fish. The policy was officially adopted in writing in 1987. The following were some major elements of the 1987 policy: Imports had to comply with the Canadian national fish health protection regulations. Imports were permitted only from facilities that had been approved or certified by a Canadian fish health officer appointed by DFO. Only fertilized eggs that had been surface disinfected in an iodine solution could be imported. No live fish (smolts) or unfertilized eggs were allowed. All Atlantic salmon eggs and resultant stock had to be held under strict quarantine for a minimum of 12 months. Shipments were limited to 300,000 eggs per year per import license. Eggs were allowed only from broodstock or parent fish that had been held at the source facility (hatchery), separate from other stocks, for one full generation. After March 31, 1989, no further imports of Atlantic salmon were to be permitted. Importers were required to hold a number of fish to maturity for reproduction purposes. In 1992, DFO revised its policy by relaxing the restrictions on imports of fertilized Atlantic salmon eggs. According to DFO officials, they decided to ease the original requirements because they had not detected any pathogens in tests of hatchlings from imported eggs since the policy had been put into effect. As shown in table 1, the revised policy, which is still in effect, (1) repealed the limit on the size of shipments of egg imports, (2) eliminated the prohibition on imports of Atlantic salmon after March 31, 1989, and (3) reduced the period during which eggs had to be quarantined. DFO, however, did not lift its ban on imports of Atlantic salmon smolts. In explaining their rationale for establishing the current policy on imports of fertilized Atlantic salmon eggs and smolts into British Columbia, DFO officials cited examples of fish pathogens that had been transferred with shipments of live fish in other parts of the world. Specifically, they referred to two pathogens introduced into Norway during the mid-1980s.DFO officials noted that there are numerous reports in the scientific literature of pathogens identified in various parts of the world, including areas of the United States, that have not been found in salmonid populations in British Columbia. They maintained that the current policy was justified in order to prevent the introduction of such pathogens into the province, particularly since Atlantic salmon is a species that is not native to British Columbia. They argued that the policy was not intended to be a nontariff barrier to imports; they pointed out that the policy was applied impartially to imports of Atlantic salmon eggs and smolts from any source outside British Columbia, including other Canadian provinces. Spokespersons for associations representing producers in both Washington State and British Columbia challenged the need for the costly, prolonged quarantine requirement for fertilized eggs, given DFO’s strict rules for certifying hatchery facilities that can export to Canada. As noted earlier, under Canadian fish health protection regulations, such facilities must be certified to be disease free after four consecutive inspections over a period of 18 months. Certification must be obtained from an agent designated and authorized by DFO.