CRS Report for Congress
Received through the CRS Web
Individual Transferable Quotas in
September 25, 1995
Eugene H. Buck
Senior Analyst in Natural Resources Policy
Environment and Natural Resources Policy Division
Congressional Research Service ˜ The Library of Congress
Individual Transferable Quotas in Fishery Management
An individual transferable quota (ITQ) is an allocated privilege of landing a
specified portion of the total annual fish catch in the form of quota shares. This
differs from the traditional open-access approach to commercial fisheries. ITQs
divide the total annual catch quota into smaller individual portions. ITQs are
generally transferable, which means fishing vessel owners can sell their ITQ
certificates or buy others’ certificates or, in some cases, lease their quota shares
depending on how much (or whether) they want to participate in the fishery. ITQs
are not considered property, but a privilege to catch a share of the total allowable
catch of fish or shellfish in a given year. The initial allocation criteria for ITQs are
controversial decisions established by Regional Fishery Management Councils, usually
based on the historical catch of vessels, to benefit current active fishing vessel owners.
Currently, three Federal ITQ programs operate in the United States — for surf
clam and ocean quahog in Mid-Atlantic and New England waters; for wreckfish along
the South Atlantic coast; and for halibut and sablefish off Alaska. Internationally,
New Zealand introduced the first major ITQ program in 1986. Other countries with
ITQ management programs include Australia, Canada, Iceland, Italy, the Netherlands,
and South Africa.
ITQ programs are intended to reduce overcapitalization, promote conservation
of stocks, improve market conditions, and promote safety in the fishing fleet. ITQ
programs guarantee a share of the catch, thus generally slowing or eliminating the
“race to fish” and allowing fishermen flexibility over the rate and timing of their
ITQ programs have been criticized for increasing the incentive for fishermen to
file false catch reports and to “high-grade” their catch. In some cases, it is also
possible for processors or wholesalers to obtain effective monopoly control over the
landings. ITQs could discourage new entrants into a fishery because of the additional
capital investment required to purchase or lease quota shares. In addition, ITQ
programs may require additional enforcement expense and could cause substantial
unemployment and socio-economic dislocation in coastal communities. Finally, the
equity of current approaches to initial allocation of ITQ shares is questioned for their
creation of wealth and windfall profits and their exclusion of processors and crew.
Knowledge and understanding of ITQ programs is evolving rapidly and much is
being learned. Many of the early problems with ITQs resulted from program design
and may not be inherent in the concept of ITQ management. However, analysis of
ITQ program implementation is scant, to date. ITQ programs have generated
substantial concerns, but how much of that criticism will prove valid and how much
of the benefits claimed by proponents might be realized is still to be determined.
Individual transferable quotas (ITQs) are controversial fishery management measures
allocating privileges of landing a specified portion of the total annual fish catch in the form
of quota shares. This management option differs from the traditional open-access approach
to commercial fisheries, and allows fishing vessel owners to sell their ITQ certificates or buy
others’ certificates or, in some cases, lease their quota shares depending on how much (or
whether) they want to participate in the fishery. ITQ programs are intended to reduce
overcapitalization, promote conservation of stocks, improve market conditions, and promote
safety in the fishing fleet. ITQ programs guarantee a share of the catch, thus generally
slowing or eliminating the “race to fish” and allowing fishermen flexibility over the rate and
timing of their fishing. Amendments to the Magnuson-Stevens Fishery Conservation and
Management Act in 1996 suspended consideration of new ITQ programs while the National
Academy of Science conducted a study of three existing federal ITQ programs and their
What is an Individual Transferable Quota? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Purpose of ITQs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Allocations, Transfers, and Property Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Initial Quota Share Allocations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current ITQ Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
U.S. ITQ Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
International ITQ Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
The Controversy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Capitalization and Concentration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Pro . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Con . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Assessment of Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Conservation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Pro . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Con . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Assessment of Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Seafood Market and Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Pro . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Con . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Assessment of Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Safety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Pro . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Con . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Assessment of Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Enforcement and Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Pro . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Con . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Assessment of Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Employment and Community Stability . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Pro . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Con . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Assessment of Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Equity and Wealth Creation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Pro . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Con . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Assessment of Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Cost Recovery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Selected References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Individual Transferable Quotas in
In 1976, Congress enacted the Magnuson Fishery Conservation and Management
Act, authorizing the Federal Government, coastal States, the fishing industry, and
other interested parties to work together through eight Regional Fishery Management
Councils to manage the Nation’s fishery resources (16 U.S.C. 1801-1882). The initial
goal of the Magnuson Act was to convert the fishery off U.S. shores from foreign
dominance to a domestic industry. This was accomplished within 15 years, resulting
in the industrialization of some portions of the U.S. fishing fleet. Another central goal
of the Magnuson Act is to achieve long-term health and stability of various fisheries,
prevent overfishing, and protect, restore, and promote the fishery through conservation and management (16 U.S.C. 1853(a)(1)(A)). However, progress toward this
goal has been much slower.
Within the Magnuson Act, Congress authorized Regional Councils and the
Secretary of Commerce to limit fishing effort (16 U.S.C. 1853(b)(6)). Individual
transferable quotas (ITQs) — as well as the related individual fishing quotas (IFQs)
— are measures that may be used to reduce effort and fishery overcapitalization.
What role ITQs/IFQs might play in accomplishing Federal fishery management
objectives is an issue in the 104th Congress’s debate on reauthorization of the
What is an Individual Transferable Quota?
An ITQ (or IFQ) is an allocated privilege of landing a specified portion of the
total annual fish catch in the form of quota shares. Quota shares designate how the
total annual fish catch (i.e., the total allowable catch or TAC)2 is to be subdivided into
specified portions for individual quota holders. ITQ management differs from the
traditional open access for commercial fisheries, in which there is no limitation on who
can catch the fish, as well as from license limitation programs.
Maribeth F. Dulay, Master’s degree candidate at the University of San Diego, researched
and prepared a draft of this report under the supervision of Eugene H. Buck, Senior Analyst
in Natural Resources Policy.
Management biologists calculate a TAC in each fishery. The TAC is the total amount of
fish that may be harvested in a fishing season, in accordance with a fishery management plan
for that fishery, with adjustments or reductions to compensate for amounts of the species taken
as bycatch in other fisheries. The TACs are set annually by Regional Fishery Management
Councils and approved by the Secretary of Commerce. The TACs are intended to ensure the
long-term health and stability of the fishery. In managing through use of TACs, catch
reporting is essential to verify individual harvest as well as the total harvest for the fishery.
ITQ shares are transferable; fishing vessel owners can buy or sell ITQ certificates
or, in many programs, can lease their quota shares, depending on how much (or
whether) they elect to participate in the fishery. IFQ shares might or might not be
Purpose of ITQs
The primary purpose of an ITQ program is to provide an incentive to manage
capital (i.e., reduce or control overcapitalization) in commercial fisheries,3 and to
improve the overall economic efficiency of the fishing industry. ITQs provide an
alternative to open access. Market, safety, and social benefits are anticipated from
controlling overcapitalization. Thus, ITQ programs are also intended to create a more
stable and profitable market-based system for commercial fishing.
Allocations, Transfers, and Property Rights
Regional Fishery Management Councils decide allocation criteria and transfer
guidelines for ITQ shares and may choose a variety of ways to design ITQ programs.
Thus, individual ITQ programs may differ, reflecting an active and rapid evolution in
the understanding of this management approach as well as differences in the fisheries
being managed and the objectives of the Councils’ management plans.
Initial Quota Share Allocations
Regional Councils recommend initial allocation criteria (i.e., qualifying schemes),
which must comply with the National Standards of the Magnuson Act (16 U.S.C.
1851(a)). A Council decides who can participate. In the U.S. surf clam and ocean
quahog ITQ fishery, for example, anyone — domestic or foreign — can own ITQ
quota shares,4 but only U.S. vessels may harvest and land the product. In the Alaska
halibut and sablefish ITQ fishery, quota shares were initially allocated only to qualified
vessel owners, who generally must be U.S. citizens, or corporations, partnerships,
associations, or other entities that meet the Federal standards for documenting a
vessel in the United States.
The “individual” part of ITQs is determined by dividing the annual TAC into
smaller individual shares. Fishing vessel owners receive ITQ certificates that allow
them to catch a fixed number of shares, representing a specific percentage5 of the
For additional background on overcapitalization, see CRS Report 95-296 ENR,
Overcapitalization in the U.S. Commercial Fishing Industry.
Although beyond the scope of this paper, it is an interesting issue whether foreign ownership
of ITQ quota shares might contravene the intent of the Magnuson Act to extend U.S. control
over all fisheries within U.S. 200-mile jurisdiction.
All the initial New Zealand ITQs in 1986 were allocated on a tonnage basis. New Zealand
law provided that, if necessary, the Government would enter the market and purchase
TAC. ITQs have often been allocated to fishing vessel owners without charge,6 based
on historical catch during a specified qualifying period. Such an allocation is designed
to benefit active fishing vessel owners, according to the history of their vessels’
participation in the fishery.7 Vessel owners with extensive historic catches during the
specified qualifying period of years receive larger ITQ shares than vessel owners with
minimal catch during this same period.8 Vessel size has also been used as a factor in
some programs for determining initial ITQ share allocation. Participation in an ITQ
program can be separated into ownership of quota shares and ownership/ operation
of fishing vessels used to catch the fish or shellfish granted through those shares, by
leasing or another arrangement that permits fishing for someone else’s quota shares.
There is growing interest in developing initial allocation formulas that reflect
factors other than historic catch record that are important to the fishing community,
such as compliance with fishery regulations, use of “clean” fishing techniques (i.e.,
minimal incidental bycatch), and historic participation even if current catches are
relatively small. In addition, critics of current ITQ practice are expressing increasing
concern that vessel owners are not the only parties that should receive an initial
allocation of quota shares. Initial allocation can easily be the most controversial part
of ITQ program development, but once it is completed (ideally through a consensus
of stakeholders), it need not be repeated, unlike the time-consuming and contentious
battles over allocation that occur frequently in open-access and license limitation
Fishing vessel owners may sell, lease, or trade their entire quota or parts of their
quota to others.9 Because, in theory, any qualified individual can acquire quota
sufficient quota to cover any required harvest reduction. When faced with a potentially large
reduction in orange roughy TAC, the Government shifted the risk to the fishing industry by
amending law to provide for proportional quotas with TAC changes allowed at the beginning
of the fishing year.
No fees are collected for ITQs because the Magnuson Act currently prevents charging a
royalty for use of the resource (16 U.S.C. 1854(d)) and because vessel owners would not
support such a program if royalties were charged.
However, because of the lengthy administrative process, as long as five years or more can
elapse between the time a Regional Council determines the method of allocation and when the
plan is actually implemented, creating the impression that inadequate consideration was given
to “current” participants in the fishery. This problem contributed to public opposition to the
Alaska halibut and sablefish IFQ program.
The choice of years for the qualifying period is often very controversial since it may benefit
one segment of vessel owners relative to another.
Although beyond the scope of this report, alternative approaches exist wherein transfer is
not permitted. Such an individual quota (IQ) program would not authorize sales and transfers.
New entry would be provided when allocated shares reverted to the government upon
retirement or exit from the fishery, and could then be reallocated by lottery, auction, or other
shares, the sales and/or leases operate in an essentially free market, and sale prices and
lease rates fluctuate, depending on expectations of catch levels and fish/shellfish
prices. However, in practice, Regional Councils can and do place restrictions on the
market by dictating whether and how ITQs can be transferred. The market can be
restricted to prevent excessive consolidation of effort and other undesirable effects
with measures such as requirements that the quota share owner be onboard the vessel
(to prevent absentee ownership), caps on the amount of quota share that can be
accumulated by an individual or firm, and restrictions on trading outside of specified
vessel classes or outside of the pool of eligible quota share owners.10 Those who quit
the fishery may sell their quota shares.
Technically, ITQs can be construed as exclusive, perpetual rights. However, in
the United States, the National Oceanic and Atmospheric Administration considers
ITQ quota shares not to be property, but to convey a privilege to catch an amount of
fish or shellfish in a given year that can be renewed or revoked. ITQs, as currently
implemented in the United States, are not permanent, and quota shares may represent
a different resource quantity every year as the TAC may vary from year to year.11
Nonetheless, the ability to sell or lease ITQ shares implies a more enduring, if not
permanent, fishing access privilege.12 While some fishermen have sought
congressional clarification that ITQs represent only a harvest privilege, others have
argued that an allocation of ITQ shares is, in effect, a taking of their current right to
fish in the open-access fishery.13 The legal basis for this assertion has not been tested
extensively in the courts. In addition, no one has yet successfully argued that the
means. Non-transferability provisions are most often included when compensation or buyback
options for fleet reduction are not acceptable. Thus, non-transferability leads, through natural
attrition and retirement, to a smaller fishery. At some later point in the fishery, modifications
to allow transfers or other means for new entry may be considered.
National Standard 4 of the Magnuson Act (16 U.S.C. 1851(a)(4)) requires that fishing
privilege allocations be carried out so that “no particular individual, corporation, or other
entity acquires an excessive share of such privileges.” Experience in eastern Canada indicates
that shadow markets may develop wherein limits on the total quota that an individual or
company can control are exceeded by formal, but illegal, private arrangements.
There is interest in the 104th Congress in having regular or periodic review and renewal built
into ITQ programs, making it even clearer that these privileges are not permanent.
The Internal Revenue Service has treated quota shares as property, seizing (April 1995) and
auctioning (May 1995) more than $1.5 million worth of Alaska halibut and sablefish IFQ
shares from 65 fishing vessel owners for non-payment of back taxes.
Indeed, it could be conceived that, under ITQ management where quota shares are awarded
to past participants in the fishery, U.S. citizens could argue, as a class, that their traditional
right to participate in an open access fishery had been taken.
Federal Government’s ability to adjust and modify an ITQ program constitutes
grounds for a regulatory “taking.”14
To date, few private banks accept ITQs as collateral for loans, primarily because
they are not comfortable with the existing system for determining the history of
previous liens and because banks have difficulty in establishing the value (i.e., longterm earnings potential) of ITQs.15 The collateral value of Alaska halibut and
sablefish IFQ shares is minimal (generally about 20 percent of their market value).
Provisions have been included in several bills introduced in the 104th Congress to
establish a central registry of ITQs to better track liens and share ownership.
The concern remains that the substantial capital value and investment in ITQs
(e.g., possibly $500 million or more in North Pacific halibut and sablefish IFQs) will
make these programs very difficult to terminate, and that Federal buyouts may
become necessary. Ultimately, only Congress, as interpreted by the courts, can
determine whether ITQ quota shares (or the opportunity to fish in an open-access
fishery) convey a right in perpetuity to the owner.16 However, the chances of a
successful takings claim based on revocation of an ITQ are remote, since the Federal
Government explicitly reserves the right to revoke ITQs or terminate the program.
The sunset provisions for ITQs in some of the bills proposing to amend the Magnuson
Act in the 104th Congress create a substantial climate of uncertainty among people
considering whether to buy or sell ITQ shares. Such uncertainty could be very costly
to people who are facing decisions on whether to sell or buy more ITQs, especially
those who choose to buy now should the ITQ program terminate in a short time
For the surf clam and ocean quahog ITQ program, see Sea Watch International v.
Mosbacher, 762 F.Supp. 370 (D.D.C. 1991).
The Cristiania Bank of Norway and the Key Bank of Seattle have accepted ITQs as
collateral for factory trawler loans. (Early in 1995, the Cristiania Bank of Norway sold its
factory trawler loans to Trust Company of the West and other financial groups.) The
National Westminster Bank of Jersey is currently one of the largest holders of ITQ shares in
the Mid-Atlantic and New England surf clam and ocean quahog fishery.
This situation parallels the debate over grazing leases and permits on Federal lands. The
law clearly identifies grazing as a privilege, subject to renewal or revocation (for cause) by
the Federal Government, and not salable or transferable (but some are sub-leasable).
Nonetheless, the value of grazing leases and permits is capitalized into the value of the lessees’
or permitees’ ranches, and is used for loan collateral.
Current ITQ Programs
U.S. ITQ Programs
Currently, three Federal ITQ/IFQ programs exist in the United States: for surf
clams and ocean quahogs in Mid-Atlantic and New England waters; for wreckfish
along the South Atlantic coast; and for halibut and sablefish in Alaskan waters.17
The surf clam and ocean quahog ITQ program was developed by the MidAtlantic and New England Fishery Management Councils and implemented by the
National Marine Fisheries Service (NMFS) in October 1990. This was the first
Federal ITQ program in the United States. The fishery is pursued from offshore of
Virginia northward to the Canadian boundary. Before the ITQ program, the Council
tried a license limitation program, but vessel owners only made their vessels more
powerful and efficient, increasing fleet capitalization. For surf clams, ITQs were
initially allocated to vessel owners based on their historical catch record in 1986,
1987, 1988, or 1989. ITQs for ocean quahogs were allocated according to average
catches for years between 1979 and 1987 when vessels reported landings. ITQs can
be traded or leased, with no requirement for vessel ownership or restriction on the
total amount of ITQ shares owned. In 1994, 48 vessels landed surf clams, while 36
vessels landed ocean quahogs; before the ITQ program, in 1989, 135 vessels fished
surf clams and 69 vessels fished ocean quahogs. Previous fishing time restrictions on
the surf clam fishery were lifted under the ITQ program. For administrative purposes,
no quota share transfers can occur during the last two months of the season.
The wreckfish ITQ program was developed by the South Atlantic Fishery
Management Council and implemented by NMFS in April 1992. These ITQs were
allocated to vessel owners based 50 percent on their historical catch record in either
1989 or 1990, with the remaining 50 percent divided equally among all those who
qualified to receive quota shares. To be eligible, a vessel owner had to document
catches of at least 5,000 pounds of wreckfish. Wreckfish ITQs are fully marketable
and can be sold, traded, or leased within the management area. The wreckfish ITQ
program does not restrict gear, type of vessel, or the amount of shares one can hold.
In the 1994 season, 17 vessels landed wreckfish; 38 vessels had landed wreckfish in
1991, before the ITQ program.
The halibut and sablefish IFQ program18 off Alaska was developed by the North
Pacific Fishery Management Council in 1992 and implemented by NMFS in March
1995. In 1993, the Alaska halibut fleet was estimated at 3,460 vessels, while the
sablefish fleet was estimated at 740 vessels. IFQs were allocated to vessel owners and
lessors who landed fish in 1988, 1989, or 1990, and based on total landings in their
In addition, the spiny lobster fishery off Florida features an ITP (individual transferable pot)
certificate program, administered by the State of Florida. Participation in this program is
compulsory for spiny lobster fishing in Federal offshore waters. This program will not be
This is an IFQ program, rather than an ITQ program, because transferability of shares is
restricted by several criteria.
best 5 of the 7 years from 1984 through 1990 (halibut) or best 5 of the 6 years from
1985 through 1990 (sablefish). Shares were allocated within separate management
areas and for specific vessel size classes. In addition, quota shares issued in amounts
less than 20,000 pounds of IFQ in the implementation years were issued as “blocks”
which are indivisible upon transfer. No such transfer restrictions exist for quota
shares initially issued in amounts greater than 20,000 pounds of IFQ. Halibut and
sablefish IFQs are marketable, but can be sold or traded only within each management
area, within the same vessel size category, and with restrictions on the total amount
and type of quota held. Although most original IFQ recipients can use hired skippers
to fish their shares, new entrants must be onboard the vessel when their shares are
caught. As much as 10 percent of IFQ shares in catcher vessel categories may be
leased, and there are no restrictions on leasing freezer vessel category IFQs. The
lease provisions have a three-year sunset and will expire at the end of 1997. In
addition, the program limits who can own IFQs and the total amount.
International ITQ Programs
New Zealand introduced the first major ITQ program in 1986; currently, this
program applies to 32 species in 10 management areas. Industry-funded stock
assessments are common for New Zealand ITQ fisheries. Italy has a clam ITQ
program. Australia has an ITQ program regulating the southern bluefin tuna fishery
and the Tasmanian, Victorian, and South Australian abalone fisheries. South Africa
manages its abalone fishery by ITQs. Canada has several fisheries that are managed
by ITQs along both Atlantic and Pacific coasts and in the Great Lakes. ITQs also are
also used to manage most Icelandic fisheries as well as the Netherlands sole and plaice
fishery. Although this is not a comprehensive list of all non-U.S. ITQ programs, it
indicates that ITQ management is widely used, internationally.
The international record so far indicates that ITQs can be very effective in
reducing or eliminating overcapitalization and the race for fish; also profits and overall
economic efficiency can increase, sometimes dramatically. The limited data on
conservation that have been collected indicate that ITQ management increases
compliance with TACs and other fishery regulations, and that ITQ holders have more
vested interest in the future of the fishery than do fishermen in open-access fisheries
(as indicated by the value of quota shares many times higher than the value of the
catch that the shares represent in a given year).19
ITQ have become quite controversial, with different constituencies claiming a
variety of effects on the fisheries. This section looks at seven topics — capitalization
and consolidation; conservation; seafood market and price; safety; enforcement and
administration; employment and community stability; and equity and wealth creation.
Each topic is discussed presenting the arguments voice in support of ITQs, the
See, for example, M.P. Sissenwine and P.M. Mace. “ITQs in New Zealand: The Era of
Fixed Quota in Perpetuity.” Fishery Bulletin, v. 90, no. 1 (1992): 147-160.
criticisms and limitations cited by opponents, and an assessment of the experience and
performance for implemented U.S. ITQ programs.
Capitalization and Concentration
Pro. Under the open-access race for fish, early entrants into a fishery find their
investment and profits eroded or eliminated by subsequent entrants. Under an ITQ
program, large capital investment to purchase more equipment and hire more crew
members to attain greater short-term fishing power is unnecessary. And since
fishermen have a secure catch share, they can fish throughout the entire season and
use the most economical way of fishing. Thus, competition to increase fishing power
(speed) on each vessel is reduced by ITQ programs, allowing vessel owners to match
capital equipment investment more closely with the amount needed to harvest the
quota shares held (rather than trying to plan for an unpredictable catch), with
extraneous capital employed more productively elsewhere in the economy. This
reduces overcapitalization. If fishermen do not fish, then they lease their quota shares.
Or if they believe their quota share is too small to make a profit, then they may buy
or lease ITQs from other fishermen, or sell their shares and leave the fishery.
The transferability of ITQs improves the overall economic efficiency in the
fishery by encouraging some fishing vessel owners to sell or lease their ITQs, rather
than to continue fishing.20 Fleet efficiency improves under an ITQ program because
fewer fishermen are able to catch the same amount of product that a larger fleet
landed under open access. Fishing vessel owners can liquidate their stake in the
fishery by selling quota shares and taking boats off the water or moving to other
fisheries. Fishermen often find it uneconomic to operate with small quantities of
quota shares, and may opt to sell their ITQs, receiving some financial return for their
investment in the fishery as opposed to receiving no return if they go out of business
in an open-access fishery.
Con. In an unrestricted ITQ program, an individual or group of individuals
could influence the market by obtaining a disproportionate share of allocations.
Processors or wholesalers could also exert substantial control over the industry by
obtaining a large portion of the quota shares. Under an ITQ program, operators with
access to capital at the lowest interest rates will be in the best position to acquire
additional quota shares. Thus, corporate investors, rather than more efficient
fishermen, are likely to purchase available ITQ shares. In addition, expectations for
an essentially free market in quota share trading could prove unfounded because of
the limited size of the market and uncertainty in share pricing.
Success in commercial fishing has traditionally depended upon the ability to
switch among fisheries as conditions (e.g., fishing pressure, environmental conditions,
market forces, natural fish stock fluctuations) warrant. Such flexibility may be lost
as if many fisheries are managed under ITQ programs.
However, some people may choose to remain in a fishery for lifestyle reasons rather than
for making a living efficiently.
Lacking sufficient quota shares to operate economically, some fishing vessel
operators may leave an ITQ fishery, selling shares to those who have more capital.
ITQs may discourage new entrants into a fishery because of the additional capital
investment required to purchase or lease quota shares in addition to vessel and gear
required to enter an open-access fishery. All the above concentrate shares.
Assessment of Performance. In the surf clam ITQ program, substantial capital
savings have accrued. Before the ITQ program, fishing was permitted only six hours
every other week, leading to low use of existing capacity and low efficiency. Once
ITQs were implemented, fleet size quickly shrank from 128 vessels (1990) to 59
vessels (1992). Vessels were consolidated or retired and remaining fishing vessels
improved their productivity. This reduction occurred while the TACs for surf clams
and ocean quahogs were reduced by 12 percent and 8 percent, respectively. At the
same time, landings were close to optimum (defined as TAC), with landings of surf
clams down only 4 percent and ocean quahogs actually increasing by 4 percent. In
addition, surf clam vessels appeared to operate more efficiently — average number
of fishing trips per vessel increased from 47 in 1990 to 83 in 1992.
In the surf clam and ocean quahog ITQ program, large companies control a
substantial portion of the quota shares.21 Borden, a major food company, had attained
control of 40 percent of the quahog and 25 to 30 percent of the surf clam shares in
1990.22 Currently, National Westminster Bank of Jersey and KPMG, an accounting
firm, are the largest holders of ITQs in the surf clam and ocean quahog fishery.23
Thus, substantial consolidation was already in progress when the ITQ program was
implemented for this fishery. However, control can be exerted in open-access
fisheries where a relatively few processors may determine the price offered to
Consolidation also occurred in the wreckfish ITQ program, but with little
concentration of shares by processors or other corporate owners. The halibut and
sablefish IFQ program apportioned IFQ shares to different size vessels and restricted
transfer to vessels in the same size class. Thus, small vessel shares cannot be bought
out by larger vessels.
In response to concerns that ITQs may be detrimental by restricting flexible
movement of fishermen among fisheries, advocates of ITQs point out that flexible
movement among fisheries was primarily a fisherman’s response to short “derby”
fishing and a flight from intense competition. As such, the stability provided by an
ITQ program may make such flexibility less important. In addition, even under an
Even prior to ITQs, this fishery was controlled by a handful of vertically integrated
processors along with a few independents, some of which had very large fleets. Although
vessel consolidation has occurred, the pattern of control is not markedly different from what
it was before the ITQ program, except that almost all the original owner-operated boats are
no longer fishing. A few new entrants have entered this fishery.
Borden sold all its quota shares in this fishery in 1994.
Most of these shares are held as escrow or in lieu of collateral, and do not necessarily mean
control is exercised by these entities.
ITQ program, fishermen have the option of purchasing shares in several different
fisheries to preserve the flexible option of moving between fisheries.
Criticism that ITQs make it difficult to enter a fishery indicates that ITQ
programs are indeed addressing their objective of reducing overcapitalization.
Lacking sufficient quota shares to operate economically, some fishing vessel operators
may choose to leave an ITQ fishery, selling shares to those with capital. ITQ
programs do discourage casual new entrants into a fishery because of the additional
capital investment required to purchase or lease quota shares. However, ITQ
program design can incorporate a lottery or other means to allocate reserved TAC or
revoked quota shares to potential serious new entrants. Thus, new entrants replace
existing effort. In the first year of the Alaska halibut and sablefish IFQ program, sales
of IFQ shares appeared brisk with many new entrants to the fishery. Thus, the initial
conclusion might be that a reasonable balance might have been achieved by
consolidating the fishing fleet, not by restricting new entry.
The general pattern in ITQ programs has been fleet consolidation. Indeed, it
appears inevitable, although not necessarily bad, that ITQ programs will contribute
to greater wealth concentration within the commercial fishing industry. However,
ITQ program design can alleviate or eliminate excessive share consolidation through
ownership limits, requirements that quota share owners participate in the fishing, or
other similar measures restricting quota share trading, such as were incorporated in
the Alaska halibut and sablefish IFQ program. Alternatively, fleet expansion could
occur if market conditions favor smaller fishing operations or should technological
advances favor certain economies of scale which prompt additional capitalization. In
addition, the number of vessels and participating shareholders in an ITQ fishery could
increase if large shareholders subdivide and sell all or portions of their quotas. In
some circumstances, therefore, ITQ programs alone may not promote consolidation
sufficiently to reduce overcapitalization without a companion effort-reduction
program, involving compensation or other buyout mechanisms to reduce fleet size.
Pro. An ITQ program grants a fishing vessel owner a share of the fishery. To
the degree that fishing vessel owners react as if they were “owners” of the fishery and
that the fishery were no longer a “commons,” overexploitation or resource waste that
reduces the value of their fishing privileges will be minimized. And to the extent that
fishing vessel owners perceive an increased security in their interests in the fishery,
they have incentives to conserve and manage the resource, to protect the value of
those interests. Also, when the race to fish is eliminated and time is no longer a constraint, fishermen tend to operate more efficiently. The potential for reducing
incidental bycatch is an additional benefit, since it is believed that fishermen will fish
more cleanly (i.e., minimize their bycatch) if they can fish in a less hurried fashion.24
Under open access, a fisherman who moves to avoid high bycatch could lose in the race to
fish. Under ITQ programs, however, no such disincentive exists to discourage vessel owners
from ceasing fishing operations and moving to a new location. ITQ programs create an
incentive to move since bycatch can be more effectively monitored on an individual basis.
In addition, ITQ programs could be designed to penalize poor bycatch performance
through forfeiture of ITQ privileges. A primary objective of IFQ programs is to give
incentives to conserve the resource, showing participants that the fish they protect and
save have a greater likelihood of benefitting themselves and not others.
Con. As long as only retained catch must be reported rather than total catch,
ITQ programs may encourage high-grading. Under individual quotas, fishermen seek
to deliver the best quality of fish to maximize the price received. The fisherman has
an incentive to “high-grade” the catch, by discarding lower quality fish that count
against the quota. This situation is less problematic in open-access fisheries, because
the race to fish usually provides a substantial incentive for fishermen to deliver as
much as they can catch as quickly as possible. In addition, migratory resources
exploited by several user groups in different locations may not be amenable to a
slower pace of fishing throughout the year under an ITQ system.
In anticipation of ITQ program implementation, fishermen may over-report their
catch in an attempt to gain an advantage in any quota share allocation scheme based
on historical performance in the fishery. This erroneous reporting could seriously
impair the factual basis for managing the fishery.
Making a profit is the prime objective of commercial fishing. Thus, incentives
to conserve the fishery resource may be less effective where only the fishing vessel
owner, and not the crew and skipper, own the ITQ shares. And with thousands of
boats in the Alaska halibut fishery, even a vessel owner holding ITQ shares has every
reason to believe that what his single vessel does will have little effect on the fishery.
Assessment of Performance. High-grading is likely whenever the quantity of
fish that may be landed is limited, as much by vessel capacity and trip limits as by an
ITQ program, especially where large price differentials exist for fish of different size
or sex.25 Thus, high-grading problems are not limited to ITQ fisheries, but also occur
in an open-access fishery. 26 An ITQ program designed to account for total catch,
rather than just retained catch, and including a well-designed observer program will
minimize high-grading and may be necessary to assure that ITQ program design
benefits are attained. The surf clam and ocean quahog and the wreckfish ITQ
Variations of ITQ programs have been discussed that allocate separate ITQs for bycatch
of certain prohibited species. Under such a system, a vessel could be required to stop fishing
if the bycatch ITQ was reached before the target species ITQ, thus providing additional
incentive to minimize bycatch, as long as observers were sufficient to assure that all bycatch
For additional information on incidental bycatch, see CRS Report 90-575 ENR, Waste
from Fish Harvesting and Processing: Growing Environmental Concerns.
In the Alaska halibut and sablefish fisheries before IFQ implementation, some processors
paid different prices while others did not. It is uncertain how this practice might change under
the IFQ program.
Pacific coast (not Alaska) sablefish are managed by trip limits. With price differences of
as much as $1.00 based on size, the incentive to high-grade is this open access fishery is
programs do not require fleet observers, so current at-sea bycatch and discards cannot
easily be estimated.
A July 20, 1995, report from Fisheries Information Systems in Juneau, Alaska,
noted that, after IFQ implementation, groundfish bycatch discards declined from 24
percent to less than 10 percent in the sablefish fishery. In addition, incidental catch
declined, while small sablefish discard declined from more than 3 percent to less than
2 percent. The presence of NMFS fishery observers on larger vessels in the Alaska
IFQ program undoubtedly restricts the opportunity to high-grade (smaller vessels are
unable to carry observers). The initial flat prices offered by processors across
different size classes of halibut during early 1995 suggest little incentive to high-grade.
However, the increased landing size of sablefish reported for the Canadian ITQ
program suggests that high-grading can be a concern. A decrease in vessels fishing
achieved under an ITQ program probably will result in decreased fishing mortality,
as long as high-grading is not excessive. Even with high-grading, survival of discards
under an ITQ program may be higher, because fish can be handled properly.
Although not used in current programs, an alternative approach could set quotas low
enough to compensate for expected overfishing or high-grading, thus arguably
attaining a more optimal catch.
Opposition to a proposed 50-percent reduction in wreckfish TAC declined
substantially after ITQs were implemented, due to “new” concerns for the long-term
health of the resource. Although, under ITQ programs, fishery managers may be able
to concentrate more on conservation issues, stock assessments often become
embroiled in seasonal controversies, since they influence TAC and the value of quota
Conservation benefits of ITQ programs, derived from the implied “ownership”
of the resource through quota shares, could be eroded by insecure expectations about
the duration and conditions of ITQ privileges. Anxiety and uncertainty about the
future can cause ITQ share owners to become just as oriented to short-term profits,
as opposed to long-term sustainability, as open-access fishermen.
Seafood Market and Price
Pro. ITQs generally should eliminate or at least slow the race to catch fish
common in many open-access fisheries by allowing fishermen flexibility over the rate
and timing of fishing and providing them more freedom to customize their operations.27 ITQs increase the flexibility of fishing operations within a fishery by imposing
fewer restrictions on fishing period and choice of gear, vessel, or technique than in
open-access fisheries. Fishing vessel owners decide on the time, location, and fishing
method. Fishermen can fish at different times and thus supply processors with a more
continuous flow of high-quality product. In addition, financial incentives for retaining
However, even ITQs will be unable to slow the pace where the fishing season is compressed
due to specific biological or behavioral features of the species targeted (e.g., brief spawning
aggregations of herring, adult salmon returning to ascend rivers and spawn). Regional
Councils will likely impose some restrictions on fishing flexibility and freedom (e.g.,
restrictions on time, location, and methods of fishing) to attain conservation goals.
and marketing non-target species will likely increase under ITQ programs. Processors
will not be bombarded with a huge amount of raw product during a compressed
season that may exceed their handling capacity and might have to be frozen for future
processing. With the moderate and regular landings under an ITQ program, more raw
product can be processed for the higher-value fresh market. Processors will also
achieve higher utilization rates by slowing down processing operations. Thus,
fishermen have more bargaining power with buyers/processors and are likely to
receive higher prices. And the fishery should produce a stable or increasing supply
for consumers. Seafood quality is also likely to improve.
Con. ITQs could increase seafood costs because consumers will miss the low
prices that occur during, and because of, the race to fish. In addition, the market
power created by consolidation of ITQ shares in a smaller number of owners could
lead to price-fixing, and consumers would pay more than in an open-access fishery.
Assessment of Performance. Under an ITQ program, competition for market
price will likely replace competition for speed in catching fish, which prevails in openaccess fisheries. Under an ITQ system, the most successful fisherman will more likely
be the one who best minimizes costs and maximizes product value. Thus physical
competition may be replaced by economic or market competition.
Before ITQs, surf clams averaged $8.00 per bushel, while ocean quahogs were
$3.00 per bushel. At the end of 1994, the average price of surf clams had risen to
$12.00-$14.00 per bushel, and ocean quahogs to $4.00-$4.50 per bushel.
Before implementing the wreckfish ITQ program, fishermen occasionally flooded
the market with wreckfish; the fishery closed in August 1991 when the entire 2
million-pound annual TAC had been reached. During the 1991-1992 season,
wreckfish sold for between $1.10 and $1.55 per pound. Since the ITQ program,
supply of wreckfish has been constant and average price per pound stable at $1.69 in
1992-1993, $1.84 in 1993-1994, and $1.86 in 1994-1995.
In the North Pacific, sablefish prices have increased from $1.22 per pound in
1994 to $1.75 or more per pound since IFQ implementation. Similar increases are
reported for halibut, likely because more product is going into the fresh market rather
than being frozen. In the British Columbia halibut fishery, the price paid to fishermen
has become quite volatile; how much of this may be attributable to implementation of
an ITQ program is conjecture.
Willingness of consumers to pay more for ITQ fish derives from perceptions of
higher fish quality and increased availability of fresh product throughout more of the
year. In addition, consumers have the potential to influence product form more under
an ITQ program, where processing need not be hurried or large-scale.
Pro. Increased flexibility in choosing when to fish should improve safety;
fishermen can fish at a more leisurely pace and avoid fishing in dangerous weather or
Con. Market forces could reduce potential safety benefits, if processors offer
premium prices during inconvenient or less safe times.
Assessment of Performance. Because ITQs guarantee that one’s allocated
catch will be available later, they provide the option of choosing when to fish. Under
ITQ programs, fishermen may still choose to fish in bad weather, competing to supply
processors since the best price for catch may be offered during and immediately after
storm periods. In addition, the race to fish may not be completely eliminated by ITQs
since the catch per unit of fishing effort expended is still likely to be higher at the
beginning of the fishing season. Although some incentive may remain to fish in less
than optimum conditions under ITQ programs, fewer personal injuries and fatalities
and less gear destruction should occur than under comparable open-access conditions.
A July 18, 1995, report from a liability pool, Marine Safety Reserve, noted a
substantial decline in the longline vessel accident rate (injuries per fishing day)
following implementation of the halibut and sablefish IFQ program.
Enforcement and Administration
Pro. ITQ shareholders will have increased interest in fishery enforcement by
NMFS personnel who monitor ITQ landings, since this enforcement effort protects
the value (and possibly the size) of their future share in the fishery. Elements of the
fishing industry advocate 100-percent observer coverage for all fishing vessels in ITQ
programs. Quota shareholders have an incentive to report on each other, since
cheating directly harms individual quota holders. Additional incentive to report can
be created by pooling quota shares revoked from cheaters and reallocating it to
remaining quota holders.
The fear of losing ITQ shares, temporarily or permanently, may also provide an
incentive that encourages compliance with regulations in ITQ fisheries. However, this
is complicated by determinations of who is responsible for the illegal activity — those
operating the vessel, the vessel owner, or the ITQ share holder.
Con. With an ITQ program, a fisherman personally benefits from poaching,
quota busting, and false catch accounting (i.e., under-reporting the quantity of fish
landed); with open access, only aggregate catches increase from false catch reports,
and one fisherman filing a false report might not benefit. Thus, ITQs increase the
incentive to operate illegally. ITQs may increase the incentive to cheat because
unreported landings would supplement the short-term value of guaranteed quota
shares. The increased dockside monitoring and enforcement staff across the North
Pacific for halibut and sablefish, especially, makes enforcement expensive, while the
sale of illegal halibut can be quite profitable.
Assessment of Performance. In the surf clam and ocean quahog fishery,
administration and enforcement costs have plummeted since the ITQ program began.
Before the ITQ program, enforcement costs in this fishery were exceptionally high
because unusually stringent management regulations were in effect — the Coast
Guard closely monitored the number of trips and fishing hours of each individual
vessel. Now extensive monitoring is no longer necessary; dockside monitoring alone
is considered adequate. In the British Columbia halibut ITQ program, ITQ holders
became actively involved in efforts to achieve good monitoring and enforcement, and
the few offenders were turned in by other fishermen. The South Atlantic Regional
Council reports that wreckfish ITQ holders have been cooperative, that compliance
with ITQ program regulations has been good, and that administrative and
enforcement costs are low. However, this optimistic view is less persuasive given the
small number of vessels and limited area fished in these fisheries. Simplified
enforcement is more likely to be found in smaller fisheries arising from peer pressure
and based on mutual interests of ITQ shareholders.
On the other hand, NMFS estimated that increased monitoring and enforcement
costs to cover additional landing ports and vessel observers for the halibut and
sablefish IFQ program would be approximately $2 million annually, to counter highgrading and bycatch concerns, and deal with the large fleet and area covered. Thus,
the outlook is less optimistic; larger ITQ programs will likely require an extensive
enforcement effort and the number of violations could be substantial. However,
regional managers believe that the estimated economic benefits of the IFQ program
will far outweigh the increase in management costs.
Employment and Community Stability
Pro. Under an ITQ program, jobs in the fishing industry are anticipated to
become more stable and permanent, replacing the short, temporary or seasonal jobs
characteristic of many open-access fisheries. In addition, smaller, less technologically
sophisticated vessels may prove to be more economically efficient under an ITQ
system because they can catch a unit of fish with less input of technology, labor, and
Con. ITQs will lead to a smaller fishing workforce, and potentially increase
unemployment. Some may be unable to find employment elsewhere, and those who
do find jobs may earn less. The most significant loss is likely to be part-time
fishermen and deck hands. Vessels will not need the dozen or so deck hands to
participate in frantic “derby” openings. They will be able to fish more efficiently with
fewer deck hands under ITQ management.
Commercial fishing is labor-intensive, located in relatively isolated communities.
ITQs could harm such communities, should a reduction in fleet size, fewer employees,
and relatively stable landings following ITQ implementation reduce the number of
processors and demand for associated shoreside services. These effects can disrupt
economics of small communities that depend on commercial fishing, especially during
the transition from open access to an ITQ program. Such impacts, if abrupt, are likely
to be painful for small communities.
Assessment of Performance. In an ITQ program or any limited-access
management program, a reduction in the number of individuals allocated shares and
reduction in fleet size and capacity will likely result in net job loss. However, job loss
is inevitable in an overcapitalized fishery, with or without ITQs, due to a fishery
collapse, declining profits, or shortened seasons. In addition, working conditions are
likely to improve under an ITQ program due to the slower pace of fishing. In the surf
clam and ocean quahog fishery, where many smaller vessels were retired from the
fishery, one-third of the people working in the fishery lost their jobs when the former
small-vessel quota shares were sold to large companies in 1992. However, jobs
shifted from infrequent trips at sea or rotation among several different vessels to fewer
jobs requiring more labor time at sea and on shore with longer periods on the same
vessel. Less crew employed for a longer period may result in the same over-all level
of employment with less turnover.
Under certain situations, the reduced competition for experienced crew under
ITQ programs may depress wages. Especially where large corporations own ITQ
shares, employment may be less secure and totally dependent upon whether and to
whom shares might be leased. In the surf clam and ocean quahog fishery, crew report
that they have to work longer hours under ITQ management for roughly the same
wages they received previously. In addition, companies have attempted to change the
basis for giving wages, with crew shares being reduced in most cases.28 Others are
more optimistic and believe that crewing jobs will more often be better paid under an
ITQ system, leading the Deep Sea Fisherman’s Union of Seattle to support the
creation of the Alaska halibut and sablefish IFQ program.
It is still too early to assess the impacts of ITQ programs on small coastal
communities, because early U.S. ITQ programs involved small fisheries in more
developed coastal regions. However, in some situations, a shift from many shortterm, seasonal jobs to fewer, long-term jobs, may lead to more stability and thus could
be better for small coastal communities. The transition from current circumstances
to an ITQ program with fewer fishermen, different supply industries, and communities
that form different links with the smaller, possibly healthier, fishing industry may be
long and traumatic for some communities. However, safeguards to impede or
minimize community change can be built into an ITQ program, especially through
geographical restrictions on quota trade. The Alaska halibut and sablefish IFQ
program should be watched closely, because it included measures to protect small
vessels operating from small coastal communities. It comes down to a value
judgment as to whether a boom-and-bust economy is better than a smaller but more
stable economy for a small coastal fishing community. How well the Federal
Government works with small communities in transition will ease or exacerbate the
pain associated with these changes.
McCay, Bonnie J., and Carolyn F. Creed. Social Impacts of ITQs in the Sea Clam Fishery.
Final Report to the New Jersey Sea Grant Collect Program, New Jersey Marine Sciences
Consortium, February 1994.
Equity and Wealth Creation
Pro. The Magnuson Act provides for equity through significant direction for
determining how allocations are to be made, both in the National Standards (16
U.S.C. 1851(a)) and in the limited-entry provisions (16 U.S.C. 1853(b)(6)). ITQ
programs ensure equity through a market mechanism that allows entry into the fishery
for those not receiving an initial allocation of quota shares, contrary to other
management approaches, such as the decommercialization of the billfish and redfish
fisheries, that completely and permanently disenfranchise commercial fishermen.
Con. ITQs can disproportionally benefit those who own the quota shares over
others in industry, including crew, skippers, and processors.29 Allocation of quota
shares to vessel owners alone does not recognize the traditional composite roles of
all parties in creating an historic catch record. Critics wonder why vessel owners
alone should be recognized in the initial share allocation process.
Additional concerns arise from the usual situation where ITQ shares are
allocated to fishing vessel owners and not to processors. Processors, like fishermen,
capitalized to support the race to fish under prevailing open-access conditions. Critics
suggest that ITQ allocation to only the harvesting sector ignores the effects of
processor capitalization and results in a redistribution of wealth from the processing
sector to the harvesting sector, through price concessions, due to fishing season
elongation and the power fishermen attain through their greater ability to choose
when and how to place fish in the market.30 Inattention to such distributional conflicts
are the source of considerable controversy in deciding whether or not to implement
an ITQ program and, if so, how it might best be designed. Compensation of
processors or a symmetrical initial allocation of ITQ privileges to both harvester and
processor sectors (sometimes referred to as a “two-pie” allocation scheme 31) are
The potential arbitrariness of the initial ITQ allocation is a large concern, because
it can convey windfall profits and create considerable wealth. Currently, there are no
standards on how allocations might be done fairly and equitably. For example,
regardless of one’s record in the Alaska halibut and sablefish fishery, vessel owners
who did not fish between 1988 and 1990 were ineligible to receive initial IFQ shares.
Conversely, someone who last fished in or retired after 1988 would have received (or
their estate would have received) quota shares, while someone who entered the
fishery in 1991 would receive none.
Assessment of Performance. What constitutes an equitable approach to the
initial allocation of ITQ shares has yet to be answered. Who should share in the initial
Although in some ITQ fisheries, processors may own ITQs (e.g., the surf clam and ocean
Matulich, Scott C., et al. “Towards a More Complete Model of Individual Transferable
Fishing Quotas (ITQs): Implications of Incorporating the Processing Sector.” Journal of
Economics and Management (in press).
Catching privileges allocated to fishermen; processing privileges allocated to processors.
allocation of quota shares is one of the most critical questions. Allocations based on
historic participation in the fishery must use sufficiently recent performance data to
reward currently active fishermen, but not use such recent years’ landings that
intentional over-reporting of catch in anticipation of ITQs can introduce other
inequities into the process. Others consider historic catch to be a seriously flawed
basis on which to allocate ITQs, since it rewards inappropriate behavior such as illegal
fishing. In addition, policymakers will continue to wrestle with questions of whether
some wealth, created through ITQ shares, should be returned to the government as
Although not specifically provided for in the Magnuson Act, Congress could
choose to amend this Act to provide for the use of any of several alternative initial
allocation methods focusing on the collection of “economic rent.”32 For example,
ITQs could also be sold initially by auction. This would generate substantial revenues
for the allocator (i.e., the Federal Government) at the expense of the purchasing
fishermen. In addition, periodic sales or renewals of ITQ shares might be conducted
by auction to increase the return to the public. Alternatively, an initial fee and an
annual ad valorem fee for program administration could legitimately be collected in
exchange for the granting of an exclusive catch privilege that ITQs represent.
Another alternative might be a lottery, 33 where the Federal Government might require
winners to pay a portion of the quota’s value before taking possession. Another
option focuses on the collection of transfer fees whenever quota shares change hands.
Other means for collecting “economic rent” undoubtedly also exist.34
Most ITQ programs are adopted when fisheries are heavily overcapitalized and
going through substantial economic stress. Although ITQ program designers may
anticipate that economic rent can be collected over time, there is also the presumption
that operators in an overcapitalized fishery would first have to survive a difficult
adjustment period. Participants and managers of older ITQ programs, which did not
provide initially for the collection of economic rent, are engaging in heated debate on
whether some fee structure is appropriate and should be implemented.
Economic (or scarcity) rents are the returns to land, labor, and capital in excess of the
minimum necessary for production. In free markets with private ownership of the factors of
production, rents assure efficient allocation of resources. ITQs have been developed as an
allocation system where one factor of production — fish — is not privately owned. However,
section 16 U.S.C. 1854(d) of the Magnuson Act restricts revenue collections to no more than
the amount required to cover administrative costs.
Either an open lottery or a lottery among a pool of applicants meeting certain qualifying
Although beyond the scope of this report, other measures include harvesters gaining
management control over certain fisheries.
Accumulated knowledge and understanding of ITQ programs are rapidly
evolving and much is being learned. ITQ programs are very flexible, and the major
concern is how well Regional Fishery Management Councils design an effective
program to address the characteristics of the regional fishery and its problems. Early
U.S. programs were small, with less than 200 vessels; conclusions based on these
efforts, while informative, might be of limited practical application. However, the
halibut and sablefish IFQ program will provide essential new information about
program design to address regional concerns. Nevertheless, ITQs may be more
difficult or even impossible to use in managing the complexities of multispecies
fisheries and fisheries for species whose abundance is highly variable.
Many early problems with ITQs are attributable to program design and may not
be inherent problems with the concept of ITQ management. Proponents claim that
ITQ systems can be designed to mitigate or obviate almost every criticism. Although
the results to date are scant, critics warn that ITQs can create dynamics that threaten
to overwhelm many design features intended to meet regionally determined goals
incorporating equity and stewardship. ITQ programs have generated substantial
concerns, but how much of that criticism will prove valid and how many of the
benefits claimed by proponents might be realized is yet to be determined. Regardless,
there is an abiding fear among some fishermen that the character of the commercial
fishing industry and small fishing communities will be sacrificed or lost, particularly
if ITQs result in large corporations or other absentee owners controlling the industry
with focused interest in market share rather than on the resource and the people.
Fishermen fear that a large corporation may seek to dominate the North Pacific
groundfish trawl fishery similar to the way shares were consolidated in the surf clam
and ocean quahog fishery. In the rush to address overcapitalization concerns, these
critics of ITQs fear that social and economic concerns may be inadequately considered
and that the independent fisherman’s traditional freedom and flexibility to “follow the
fish” will be sacrificed.
Propriety interests, related to holding ITQ quota shares, are likely to provide
conservation incentives. However, these incentives are eroded when ITQs are
delimited as revocable privileges, and could be further diminished if sunset provisions
are enacted to terminate ITQs after a specific time period. Conservation incentives
are most effective when fishing vessel owners feel most secure, participate in the
fishing, and are relatively immobile. Where the linkage between these is incomplete,
conservation may suffer and enforcement costs climb. A key issue is whether, and if
so how, Congress should provide guidance to NMFS and the Regional Councils about
designing ITQ programs to provide secure expectations about the duration and
conditions of ITQ privileges and about the length of tenure of those privileges
necessary to bring about hoped-for improvements in resource stewardship. It remains
uncertain whether any increase in potential legal challenges to ITQ programs will
diminish the will and ability of NMFS to deal effectively with conservation and
The behavioral response of consumers, processors, and fishermen to ITQ
programs will play a large role in determining whether the impacts of ITQ
implementation are positive or negative. Consumers may pay higher prices for ITQ
fish, but do so with the perception that they are receiving a higher value product,
since consumers could easily substitute other lower-priced protein sources for
seafood. Processors could choose to emphasize ITQ species to fill slack time
between other episodic (i.e., migratory or seasonal) fisheries. Fishermen could
precipitate a “domino effect” of management problems if large-scale movement into
remaining open-access fisheries occurs as ITQ programs consolidate effort in selected
An additional concern is the potential for ITQ programs to dramatically alter the
balance between the harvesting and processing sectors of the commercial fishing
industry. Under open-access conditions with short seasons, processors can exert
substantial control over markets and prices. However, the power of the processing
sector is greatly diminished by an ITQ program, since fishermen have much more
freedom to choose when to provide fish. Thus, how much ITQs might empower
fishermen and allow them to derive concessions that could harm the consumer or
blunt conservation efforts is problematic. One could easily say that we have lived the
past century with processors wielding the balance of this same power.
Finally, some of the criticisms leveled at ITQ programs are common to all fishery
management, and one should take care to judge ITQ programs by appropriate
measures, i.e., differences from the fishery under open access. Commercial fishing is
very complex. ITQs must not be seen as providing the final or sole solution to fishery
management concerns, but are only one tool to be used in conjunction with more
traditional fishery management options. ITQs alone can address only some of the
present concerns (e.g., ITQs alone will not bring about restoration of any fishery,
because ITQs do not address habitat quality and other environmental issues).
Anderson, Lee G. Consideration of the Potential Use of individual Transferable
Quotas in U.S. Fisheries. v. 1, Overview Document, of “The National ITQ
Study Report” prepared under contract for the National Oceanic and
Atmospheric Administration, Mar. 13, 1992. 71 p.
—— “An Economic Analysis of Highgrading in ITQ Fisheries Regulation Programs.”
Marine Resource Economics, V. 9, No. 3 (1994): 209-226.
Arnason, R. “On Catch Discarding in Fisheries.” Marine Resource Economics, V.
9, No. 3 (1994): 189-207.
Berman, Matthew, and Linda Leask. “On the Eve of IFQs: Fishing for Alaska’s
Halibut and Sablefish,” Alaska Review of Social and Economic Conditions, V.
24, No. 2 (Nov. 1994): 1-20.
Binkley, Marian E. “Nova Scotian Offshore Groundfish Fishermen: Effects of the
Enterprise Allocation and the Drive for Quality.” Marine Policy, V. 13, No. 4
Copes, Parzival. “A Critical Review of the Individual Quota as a Device in Fisheries
Management Tool,” Land Economics, V. 62, No. 3 (Aug. 1986): 278-291.
Duncan, Leith. ITQs: A Critical Appraisal. Washington, DC: Greenpeace USA,
1992. 40 p.
Fujita R.M., D.D. Hopkins, and Z. Willey. Answers to Questions on Individual
Quotas for Fish Harvest Privileges Raised by the House Subcommittee on
Fisheries Management. Oakland, CA: Environmental Defense Fund, March
1995. 9 p.
Fujita R.M., and D.D. Hopkins. Can ITQs Help Fish and Fishing Communities?
Oakland, CA: Environmental Defense Fund, date uncertain. 3 p.
Gauvin, John, John M. Ward, and Edward E. Burgess. “A Description and
Preliminary Evaluation of the Wreckfish Fishery, Polyprion americanus, under
Individual Transferable Quotas,” in Proceedings of the International Symposium
on Management Strategies for Exploited Fish Populations. Fairbanks, AK:
Alaska Sea Grant College Program, 1993. p. 761-789.
Greer, Jed. The Big Business Takeover of U.S. Fisheries: Privatizing the Oceans
through Individual Transferable Quotas (ITQs). Washington, DC: Greenpeace
USA, April 1995. 21 p.
Harper, Scott. “Nine Seafood Companies Sue over Clam Quota.” The (Norfolk)
Virginian-Pilot, (June 13, 1995): D1.
Harris, Kenneth C., and Linda F. Hardy. The 1994-1995 Wreckfish Fishery Annual
Report. Beaufort, NC: South Atlantic Statistics Team, Administrative and
Research Services Division, Beaufort Laboratory, Jan. 1995. 4 p.
Mace, Pamela M. “Will Private Owners Practice Prudent Resource Management?”
Fisheries, V. 18, No. 9 (1993): 29-31.
Matulich, Scott C., Ron C. Mittelhammer, and Carlos Reberte. “Towards a More
Complete Model of Individual Transferable Fishing Quotas (ITQs): Implications
of Incorporating the Processing Sector.” Journal of Economics and
Management (in press).
McCay, Bonnie J., and Carolyn F. Creed. Social Impacts of ITQs in the Sea Clam
Fishery. Final Report to the New Jersey Sea Grant Collect Program, New
Jersey Marine Sciences Consortium, February 1994.
Milliken, William J. “Individual Transferable Fishing Quotas and Antitrust Law,”
Ocean and Coastal Law Journal, V. 1, No. 1 (1994): 35-57.
Sissenwine, M.P., and P.M. Mace. “ITQs in New Zealand: The Era of Fixed Quota
in Perpetuity.” Fishery Bulletin, V. 90, No. 1 (1992): 147-160.
Squires, Dale, James Kirkley, and Clement Tisdell. “Individual Transferable Quotas
as a Fisheries Management Tool,” Reviews in Fisheries Science, V. 3, No. 2
True North, A Special Report to the Seafood Industry. North Pacific Fishery Management Council. Anchorage, AK: Oct. 1992. 24 p.
U.S. Congress. House. Committee on Merchant Marine and Fisheries. Subcommittee on Fisheries Management. Transferable Quotas Under the
Magnuson Act. Hearing, Feb. 9, 1994. Washington, DC: Serial No. 103-82.
U.S. Dept. of Commerce, National Marine Fisheries Service, Restricted Access
Management Division. IFQ Program: Insights and Updates. Juneau, AK: Feb.
1994. 16 p.
—— IFQ Program: Under Way. Juneau, AK: Feb. 1995. 22 p.
Wang, Stanley. “The Surf Clam ITQ Management: An Evaluation,”
Resource Economics, V. 10 (1995): 93-98.