In addition,  consolidation of surfclam and ocean quahog quota is greater than NMFS  data indicate. The governing rules of each program may have affected the  extent of consolidation and the information collected. However, without  clear and accurate data on quota holders and fishery-specific limits on  quota holdings, it is difficult to determine whether any quota holdings in a  particular fishery would be viewed as excessive, as prohibited by the  Magnuson-Stevens Act. Instead, the councils let federal antitrust  laws determine whether any quota holdings are excessive. Because the surfclam/ocean quahog and wreckfish programs have no  specific limits on the amount of quota any one individual or entity can hold,  NMFS does not routinely gather and assess information on the ownership  interest of each quota holder. No Foreign-Owned Entities Currently Hold Quota

We found no evidence that foreign entities currently hold or control quota  in the three IFQ programs. The Alaskan halibut and  sablefish program explicitly prohibits foreign citizens and businesses from  holding quota and requires all quota transfer applicants to declare  themselves to be U.S. citizens or U.S. entities. In contrast, the  surfclam/ocean quahog and wreckfish programs allocate quota to qualified  “persons,” defined as U.S. citizens, and tie eligibility for holding quota to  the requirements for owning a U.S.-documented vessel engaged in the  fisheries of the United States, that is, being a U.S. citizen or in the case of a  corporate owner being 75 percent owned and controlled by U.S. citizens. Economic Effects on Halibut and Sablefish Processors Varied and Are Difficult to Quantify

Some processors were adversely affected by the implementation of the  halibut and sablefish IFQ program while others benefited. However,  quantifying the economic effects of the IFQ program on processors is  difficult because much of the data needed to measure changes in  profitability are proprietary. The  study estimated that halibut processors suffered a 56 percent, or  $8.7 million, loss in gross operating margins because the IFQ program  caused halibut prices to increase and processors’ market shares  to change. While we could not validate or replicate the study’s results because the  proprietary data used in the study were confidential, we identified a  number of problems with the study’s methodology and scope that brings  into question the reliability of the study’s estimates. Scope and Methodology

To assist in deliberations on individual fishing quota (IFQ) programs, we  reviewed the Alaskan halibut and sablefish, wreckfish, and surfclam/ocean  quahog programs to determine (1) the extent of consolidation of quota  holdings, (2) the extent of foreign holdings of quota, and (3) the economic  effect of IFQ programs on seafood processors.
Why GAO Did This Study

To assist in deliberations on individual fishing quota (IFQ) programs, GAO determined (1) the extent of consolidation of quota holdings in three IFQ programs (Alaskan halibut and sablefish, wreckfish, and surfclam/ocean quahog); (2) the extent of foreign holdings of quota in these programs; and (3) the economic effect of the IFQ program on Alaskan halibut and sablefish processors.

What GAO Found

All three IFQ programs have experienced some consolidation of quota holdings. Further, consolidation of surfclam and ocean quahog quota is greater than National Marine Fisheries Service (NMFS) data indicate, because different quota holders of record are often part of a single corporation or family business that, in effect, controls many holdings. Program rules may affect the extent of consolidation in each IFQ program. While the Alaskan halibut and sablefish program set specific and measurable quota limits, the surfclam/ocean quahog and wreckfish programs did not, relying instead on federal antitrust laws to determine whether any quota holdings are excessive. Without defined limits on the amount of quota an individual or entity can hold, it is difficult to determine if any holdings would be viewed as excessive. GAO did not identify any instances where foreign entities currently hold or control quota. While NMFS requires transfer applicants in the halibut and sablefish program to declare themselves to be U.S. citizens or U.S. entities, there is no similar requirement for the surfclam/ocean quahog and wreckfish programs. As a result, in these programs, the potential exists for the transfer of quota to foreign entities. The economic effects of the halibut and sablefish IFQ program are not uniform. Some processors were adversely affected by the IFQ program, while others benefited; however, it is difficult to quantify the actual effects. The only estimate of the program's economic effect on processors is a 2002 study commissioned by the state of Alaska. This study estimated that halibut processors experienced a 56 percent loss in gross operating margins. While GAO could not validate or replicate the study's results, its analysis of public data and the study's methodology raised several concerns about the reliability of the study's estimates. Also, the study did not take into account other factors that may affect profits, such as the diversity and value of other species processed.