5.1 The Application for Transfer
All transfers or leases of QS must be reviewed and approved by NMFS. Persons involved in the transfer or lease of QS are required to complete and submit a transfer application form to the RAM Division. Part of this application is to be filled out by the transferor and part of it is to be filled out by the transfer recipient. In some cases, brokers who are the market-makers for the transactions help complete the requisite forms.
The transfer application form asks some basic questions to help NMFS monitor changes under the sablefish IFQ program. Page three of the form contains questions about the transfer, including the prices paid for the QS and any current year IFQ associated with the transfer. There are also questions about the reasons for the transfer, the method by which the QS was located, the relationship between transferor and transferee, and the methods of financing the transfer. The questions on the transfer application form are discussed in more detail in the sections that follow. A copy of Page 3 of the form is contained in Figure 5.1-1. This chapter discusses the following topics on 1995 transfers:
5.2 QS "Priced" Sale Transfers
This section covers a subset of QS transfers which represent "priced" sales transfers. The focus of the section is to use the information on the 1995 transfers to provide estimates of average prices for sablefish QS by area, and by vessel category within an area.
There are several caveats associated with these statistics. For example, there is some ambiguity on the information provided on the NMFS transfer application form. The form does not explicitly differentiate between sales transfers and gift transfers. Priced sales transfers used in the tables in this section were selected by the presence of pricing information.1 The reader should be aware that there were other sales transactions for which no price information was provided.
The transfer application form contains spaces for the transferor to provide the price received for the QS in terms of dollars per unit of QS and/or in terms of dollars per pound of 1995 IFQ. The price is more frequently provided in terms of dollars per pound of 1995 IFQ rather than in terms of dollars per unit of QS.
The reader should also be aware that there is ambiguity as to the meaning of some reported prices, apparently due to confusion on how to complete a question on the transfer application form. Transferors were first asked if they were using a broker to transfer the QS, and, if so, how much they were paying in broker's fees. Finally, they were asked: "What is the net price you are receiving for the QS/IFQ?" The implicit question then is: "What was the price of the QS after deducting the costs of the broker's services?" If the question had been answered in this fashion, it would be possible to reconstruct the gross price by adding back in any payments to brokers.
However, a RAM staff person familiar with the data collection process has suggested that the "net" price data may often be more accurately interpreted as "gross" price data. This person has talked with brokers and believes they tend to put in gross sales prices. This person also checks odd looking prices reported on the transfer application form by going back to copies of sales documents which must be submitted with the transfer form. If errors were made on the form, the staffer enters gross price information from the sales documents. This staffer believes that most reported prices are gross but that some of the prices reported are net prices as originally requested on the survey.2 Because of this confusion over what the prices mean, the authors used the reported prices to develop the estimates in this section without adding or subtracting brokerage fees.
The prices at which QS and IFQs are bought, sold, and leased are considered confidential information by NMFS. In this report, summary information on average prices have not been reported if there are fewer than four observations in the category. This was done to preserve the confidentiality of the underlying data. Such cases have been indicated by a "C" in the tables.
The sale of QS may occur with or without the associated current year IFQs. The sale of QS can occur with any associated "remaining" current year IFQ that has not been fished yet. Each of these different types of QS transfers has to be treated differently in order to properly interpret the prices associated with them.
Table 5.2-1 provides annual average 1995 prices for QS sold with all accompanying 1995 IFQs. Table 5.2-2 provides similar information on a quarterly basis.3 These data are provided by management area and vessel class. The table includes data on average price per unit of QS transferred, the average price per unit of 1995 IFQ transferred, the amount of QS transferred, the amount of IFQ transferred, the number of transactions, the QS per transaction, and the IFQ per transaction.
The data suggest that the average QS price per unit of 1995 IFQ was similar from area to area for small catcher vessels (60 feet or less). In areas where the estimates could be reported, the average price per unit of 1995 small catcher vessel IFQ varied from $6.28 per pound in the West Yakutat area to $6.54 per pound in the Central Gulf area. Prices could not be reported in the Aleutians and Bering Sea area because of the small number of observations. The reader should note that the average price per unit of QS cannot be easily compared between the areas because the 1995 IFQ value of the QS varies by area.
There were fewer priced sales transfers with all of the associated 1995 IFQ in the large catcher vessel class (greater than 60 feet length overall), except in the Aleutian Islands area. Prices could not be reported in the Western Gulf and Bering Sea. In the remaining areas, the average annual QS prices for large catcher vessels stated in terms of dollars per pound of 1995 IFQ ranged from $4.21 per pound in the Aleutian Islands to $6.00 per pound in the Southeast area.
Large catcher vessel QS appeared to be less valuable than small catcher vessel QS during 1995 in the Southeast, West Yakutat, and Central Gulf areas. However, this result should be viewed cautiously because of the small number of priced sales observations involving large catcher vessel QS.
Table 5.2-3 shows 1995 annual average prices for QS sold with no accompanying IFQs. The table is otherwise similar to Table 5.2-1 except that to avoid confusion no price per unit of 1995 IFQ was calculated. Note that the table only shows area/vessel categories where transactions of this type occurred, and omits area/vessel category combinations where there were no transactions.
There were very few priced transactions that did not include accompanying IFQ. Only one category, Southeast small catcher vessel QS, had enough transactions to allow reporting. The estimated average price of Southeast small catcher vessel QS was $1.45 per QS unit. Recall that Table 5.2-1 reports an average price in this category of $1.19 per QS unit, for transactions that included all accompanying IFQs. These contradictory results should be viewed cautiously since the average in Table 5.2-3 was calculated using only 4 transactions, and the average in Table 5.2-1 used 73 transactions.
No reports were prepared for transfers of QS with only a portion of the associated 1995 IFQ. There were very few of these observations and the information they provide is too scant and idiosyncratic to present in a table, as each transaction has a different portion of 1995 IFQ included in the transaction.
5.3 Blocking and the Price of QS
A feature which the NPFMC added to the sablefish IFQ program was the "blocking" of all initial allocations of QS that translated into less than 20,000 pounds of sablefish IFQ for an area as calculated by a special conversion rule.4 The tables in this section examine the impacts of the blocking provision on the price of QS.
Under the program rules, blocked QS must be sold as a unit and catcher vessel blocked QS often cannot be leased because of the 10% leasing restriction. In addition, a person is only allowed to hold two blocks of QS in an area. If a person holds any unblocked QS in the area, then the person is only allowed to hold one block of QS.
The purpose of the block provisions, as expressed by the proponents, was to make a portion of the QS relatively unattractive to persons who wanted to put together more full-time sablefish operations. They hoped the block provisions would ensure there would always be QS available to a part-time fleet of small operators. The proponents felt this would help maintain some of the diversity of the fleet that existed under open access and thereby make the IFQ program less disruptive to isolated Alaska fishing communities. Proponents also predicted that the blocked QS would sell for a lower price per QS unit and hence would be more affordable for a fleet of small part-time operators, as well as new entrants to the fishery.
Table 5.3-1 shows blocked and unblocked QS prices for sales of QS with all associated 1995 IFQ. The table provides data by management area, vessel category, and block status. Again, there were relatively few priced sales transactions of sablefish QS in many area/vessel category combinations, and therefore comparisons between prices of blocked and unblocked QS often cannot be made.
The comparisons that can be made between the 1995 prices of blocked and unblocked sablefish QS occurred in the small catcher vessel (up to 60 feet) category. In two areas, the average price of blocked small catcher vessel QS was greater than the average price of unblocked small catcher vessel QS. In two other areas, the average price of blocked small catcher vessel QS was less than the average price of unblocked small catcher vessel QS. Thus the impacts of blocks on QS prices are ambiguous.
The authors also examined blocked and unblocked QS prices for sales of QS with none of the associated 1995 IFQ, and blocked and unblocked prices for QS leases. Again, there were too few observations to allow for meaningful reports of these results.
Table 5.3-2 shows price and transfer information for blocks of different sizes in sales of blocked QS with all associated 1995 IFQ. This table does not contain any information on the prices of unblocked QS.
Again, the small catcher vessel category was the only one with sufficient observations to make a comparison by block size. These data for small catcher vessels show that sometimes larger blocks have higher prices than smaller blocks, and that price differentials can be substantial. For example, Table 5.3-2 shows that in the Southeast area in the small catcher vessel category, blocks less than or equal to 1,000 QS units had an average QS price of $5.02 per pound of 1995 IFQ while blocks between 10,000 and 15,000 QS units had an average price of $6.65 per pound of 1995 IFQ.
However, in the West Yakutat and Central Gulf areas a closer range of prices is shown between block sizes for small catcher vessels. In these areas, a positive relationship between block size and the price of QS appears to be less pronounced. Again, these estimates should be viewed cautiously due to the small number of observations.
The authors also examined price information on QS blocks of different sizes that were transferred without any 1995 IFQ. However, there were too few observations to allow for a meaningful report.
5.4 QS Lease Prices
This section provides information on 1995 QS lease prices. As noted elsewhere in this report, there were not many formal leases during 1995. Table 4.4-1 in Chapter 4 showed that there were only 77 sablefish lease transactions during 1995 and all but two of these were for freezer vessel QS rather than for catcher vessel QS.
Table 5.4-1 provides information on the 37 lease transactions for which pricing information was available and met other selection criteria.5 The average QS lease price varied from $.67 per pound of 1995 sablefish freezer vessel IFQ in the West Yakutat and Bering Sea areas to $.99 per pound of 1995 IFQ in the Western Gulf area.
5.5 Sales, Gifts, Trades, and Other Transfers
The 1995 transfer application form did not specifically ask if a QS transfer was a sale, gift, or trade. Absent this, the authors had to use available information and some decisional criteria to decide how transactions should be classified.
For example, on the transfer application form, persons involved in the transfer often indicated whether or not a transfer was a gift in their answer to one of the open-ended questions. These answers were most commonly made in the answer to the question: "What is your reason for transferring the QS and/or the IFQ...?" and as an explanation to the "other" response option for the question: "If this is a purchase of QS or IFQ, how are you financing the purchase...?" Respondents would often answer these questions by writing in "gift" or "gift transfer," "gift to son," and other similar categories.
Using this and other information, the transfer transactions were classified into one of five categories:
Table 5.5-1 provides data on the amount of QS transferred in 1995 by management area and the type of exchange. A lack of sufficient information prevented the classification of more than half (52.9%) of the QS transferred in the Bering Sea. In other areas, the percentage of transferred QS that was classified as "unknown" ranged from 13.9% in the Southeast area to 34.1% in the W. Yakutat area.
As can be seen, "priced sales," as measured by amount of QS transferred, were the most likely type of known exchange during 1995 in all areas. Priced sales represented from 24.5% of the QS transferred in the Bering Sea to 73.4% of the QS transferred in the Aleutian Islands.
The percentage of QS transferred as "gifts" was relatively low, ranging from 0 % in the Bering Sea and Western Gulf to 7.5% in West Yakutat. Similarly, the percentage of QS transferred in "other sales" was also low, with percentages ranging from 0% in the Bering Sea to 8.0% in the Western Gulf. Note again that one should use caution when using these figures, due to the high number of "unknown" transactions.
Table 5.5-2 provides data on the number of transfer transactions during 1995 by IFQ area and nature of the exchange. The table provides a somewhat similar story to Table 5.5-1. "Priced sales," as measured by the number of transactions, were the most likely type of exchange during 1995 in all areas except the Bering Sea. Priced sales represented from 38.5% of the transfer transactions in the Bering Sea to 74.0% of the transfer transactions in the Southeast area.
Again, the type of exchange was unknown for many transfer transactions. The percentage of QS transfer transactions classified as "unknown" ranged from 9.3% in the Southeast area to 46.2% in the Bering Sea area.
5.6 Finance Source on Priced Sales Transfers
The transfer application form contains questions about the source of financing for transfer transactions. Possible sources listed on the form include personal, bank, Alaska Department of Commerce and Economic Development (ADCED), Commercial Fishing and Agriculture Bank (CFAB), seller, processor, and other. In many cases, persons indicated more than one source of financing. In other cases, transfer application forms had missing information.
Table 5.6-1 provides information on the sources used to finance 1995 "priced sales" transactions. The table provides data on the quantity and percentage of priced QS transfers under each finance method. These data are reported by area. Again, since some reported more than one finance method used, the row percentages in the table total more than 100%.
The data in the table indicate that in some areas the finance source was not reported for a substantial amount of the transferred QS. The amount of QS transferred with a "missing" finance method type ranged from 21.8% in the West Yakutat area to 0% in the Bering Sea.
Personal resources were the most common finance source indicated on the transfer application form in most areas. A majority of the QS transferred through priced sales indicated personal resources as a finance method in all IFQ areas except the Bering Sea and Aleutian Islands. "Commercial Bank" or "Seller" were the next most common method of finance used. "ADEC/CFAB" and "processors" were not indicated as a large source of QS financing for these 1995 priced sales.
Table 5.6-2 provides similar information but substitutes the number of transfer transactions for the amount of QS under each source of financing. The relative importance of each finance source is roughly comparable to Table 5.6-1. As a percentage of transfer transactions, personal resources were the most common source of financing in all areas except the Aleutian Islands.
5.7 Relationship of Buyer and Seller on Permanent Transfers
The transfer application form asked buyers to indicate their relationship with the seller of the QS. Buyers were able to select from one of four possibilities: "business partner," "personal family member," "other relative or friend," and "no relationship." Respondents were asked to select only one of these possibilities.
These categories were designated as "partner," "family," "friend," or "none," respectively in the tables in this section. Note that friend includes "other relative" and that "none" means "no relationship."
Table 5.7-1 provides a summary of the responses to this question for all QS transfers recorded as transfer, sweep-up, and court transactions on the RAM database. The data are provided by management area and show the amount of QS involved in transfers based upon the relationship between the buyer and the seller. The table should be read cautiously because the relationship question was not answered for many transfers. The percentage of QS involved where there was no answer to the relationship question ranged from 8.7% in Southeast to 49.4% in the Bering Sea.
Table 5.7-2 provides similar summary data but focuses on the number of transfer transactions rather than the amount of QS involved in the transactions. The results are similar to Table 5.7.1. The number of transfers with "missing" relationship information ranged from 5.3% in Southeast to 33.3% in the Aleutian Islands.
"None" or "no relationship" was the most likely response in all areas, among the transfer applications where the relationship question was answered. This is true if one looks at the number of transactions or at the amount of QS involved in those transactions. This may be partially due to the rapid development of businesses serving as market-makers who are facilitating transactions among buyers and sellers who are not related and who may be living in quite different locations.
The percentage of 1995 transactions indicating "no relationship" ranged from 46.7% in the Aleutians to 61.3% in the Southeast area. When measured as a percentage of the QS units transferred, the percentage classified as "no relationship" ranged from 44.0% in the Bering Sea to 72.8% in the Aleutians.
5.8 Intra-cohort and Cross-cohort Transfers
Table 5.8-1 provides 1995 QS transfer patterns by area and resident type. The resident type categories are the five used earlier in the report, namely Alaska Rural Locals (ARLs), Alaska Rural Nonlocals (ARN), Alaska Urban Locals (AULs), Alaska Urban Nonlocals (ARN), and Nonresidents (N).
The table places all of the transferred QS into categories which indicate the resident type of both the transferor and the transferee. The table allows one to see if transfers tended to be between persons of the same resident type (intra-cohort) or between persons of different resident types (cross-cohort).
For each area, the data provide the amount and percentage of QS transferred from a particular resident type to persons of the same resident type and to persons of other resident types. For example, in the Southeast management area, 325,940 units of QS were transferred from ARLs to other ARLs during 1995. This represented 36.9% of the QS transferred from ARLs in the Southeast area during 1995.
The data indicate that nonresidents transferred the greatest amount of QS in 1995, and tended to transfer it to other nonresidents. This is true for all areas except the Bering Sea, where AUNs transferred the largest amount of QS (691,636 shares). Nearly all of it (98.3%) went to other AUNs.
AUNs transferred the next greatest amount of sablefish QS in 1995 except in the Southeast and Central Gulf areas. In all areas except the Aleutian Islands, the greatest portion of the QS transferred by AUNs went to other AUNs.
The majority of QS units transferred by ARLs were transferred to other resident types in areas where such transfers occurred. Similarly, the majority of QS units transferred by ARNs went to other resident types. The majority of the QS transferred by AULs went to other AULs in the Southeast and Central Gulf areas. The small amount of QS transferred by AULs in the Western Gulf went to ARNs.
Table 5.8-2 provides similar data on the number of QS transfer transactions by area and resident types. The transaction data provide a roughly similar story although the percentage of transfer transactions that went from one resident type to another can vary from the percentage of QS that went from one resident type to another because the amount of QS in a transaction can vary widely.
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