6 Types of Transfers, Financing of Transfers, Relationships between Transferors and Transfer Recipients, and Use of Brokers
This chapter uses information collected during QS transfers to classify transactions by type of transaction (that is, as priced sales, gifts, trades, etc.), and to study the extent to which different financing sources were used in priced transfers, the relationships between parties to transfers, and the extent to which brokers are involved in transfers.
All permanent 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 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 these forms. The transfer application form asks some basic questions to help NMFS monitor changes under the halibut IFQ program. Appendix II provides copies of the transfer applications used in 1995 and 1996. Data from the transfer application form has been used to make the tables for this chapter.
6.1 Sales, Gifts, Trades, and Other Transfers
The transfer application form did not specifically ask if a QS transfer was a sale, gift, or trade. Without this information, the authors had to use other available transfer form information and some decision criteria to decide how transactions should be classified. For example, on the transfer application 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 such as, "What is your reason for transferring the QS and/or the IFQ...?" and "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," "gift transfer," "gift to son," or a similar answer.
The transfer transactions were classified into one of five categories:
Priced sales: includes all transfers where a price for the QS transferred could be obtained from the transfer application form.
Other sales: includes transfers where some monetary exchange occurred but where NMFS-RAM could not calculate a price for the QS based on the available information.
Trades: includes transfers where something was traded for the QS.
Gifts: includes transfers noted as gifts where there was no immediate evidence of a reciprocal exchange.
Unknown: includes transfers where no information was provided or insufficient information was provided to classify the transaction.
Table 6-1a provides data on the amount of QS transferred in 1995 and in 1996 by management area and the type of exchange. The first columns show the total amount of QS transferred in priced sales, and the percent of all QS transferred that was transferred in priced sales.
Permanent transfers occurred in all areas except 4E, where 100% of the TAC was devoted to CDQs. "Priced sales" was the most important category. Over both years, priced sales accounted for the highest proportion of the QS transferred in six of the areas, a majority of the QS transferred in five of the areas, and about 75% of the QS transferred in two of the areas. In each of the management areas in which QS was transferred, except 4C, the percent of all QS transferred in priced sales rose from 1995 to 1996. Sometimes this rise was large; in Area 3B priced sales transfers accounted for 57.7% of all QS transferred in 1995 and rose to 81.1% of all QS transferred in 1996.
The remaining columns show the amount and the percentage of each area's QS transferred in "other sales," "trades," "gifts," and "unknown" transaction types. In 1996, "other sales" dropped in 2C, 3A, 3B, and 4B, rose in 4A and 4D, and were unchanged in 4C, where there were none in either year. There was no apparent pattern in trades. Gifts fell in all areas in 1996 except 4B and 4D where there were none in either year. There was no apparent pattern among "unknown" transactions. Unknown transactions did account for large proportions of the QS transferred in all areas. Over the two years, they made up a minimum of 12.7% of QS transferred in Area 2C and a maximum of 69.5% of QS transferred in Area 4C.
Table 6-1b provides information on the number and percentage of halibut transfer transactions that were classified as priced sales, other sales, trades, gifts, or unknown. Transfer transactions are distributed roughly in the same fashion as QS transferred. However, differences exist since the amount of QS transferred can vary widely across transactions.
The interpretation of these assignments of QS to different transaction types is complicated by changes in the transfer form used to collect information between 1995 and 1996. The 1996 transfer form moved the question on pricing up in the list of questions, and simplified it by asking for total price as opposed to the net price after broker's fees. In 1996, "Received as gift" was introduced as an explicit category for answering the question on sources of financing. The format for open ended questions was changed in several places between 1995 and 1996. Because of these factors, the reader should view these data with caution.
Table 6-1a. Halibut QS Transfer Activity by Area, Year, and Nature of the Transfer, 1995-96
Table 6-1b. Numbers of Halibut Transfers by Area, Year, and Nature of the Transfer, 1995-96
6.2 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 (DCED), 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 6-2a provides information on the sources used to finance QS transferred in "priced sales" transactions in 1995 and 1996. The table provides data on the amount and percentage of QS transferred under each finance method. These data are reported by area. Since some reported more than one finance method used, the row percentages in the table total more than 100%. Note that no transfers occurred in Area 4E, where 100% of the TAC was allocated to CDQs
In both years, personal resources were the most common finance source indicated on the transfer application form. In each area and year, personal finance was used for a majority of QS transferred in priced sales. "Commercial bank" or "seller" were the next most common methods of finance used. "DCED or CFAB" and "processors" were not generally indicated as a large source of QS financing in either year (except that "DCED or CFAB" was used as a source of financing in 19.0% of the QS transferred in priced sales in Area 4A in 1996).
The data in the table indicate that the finance source was not reported for substantial amounts of the QS transferred in different areas in 1995, but that the incidence of unreported finance types dropped in all areas in 1996 (it dropped in all areas except 4D where there was no missing information in either year). The rates for non-reporting over the two years ranged from 0% in 4D up to 9.5% in 4B.
Table 6-2b provides similar information but substitutes the number of transfer transactions for the amount of QS transferred under each source of financing. In general, the relative importance of each finance source is roughly comparable to the corresponding source for QS shown in Table 6-2a. Personal financing seems to be most important, followed by bank and seller financing.
Again, because of changes in the transfer form between 1995 and 1996, these data should be viewed with caution.
Table 6-2a. QS Financed for Priced QS Sales, by Area, Year and Finance Method, 1995-96
Table 6-2b. QS Transfer Transactions for Priced QS Sales, by Area, Year, and Finance Method, 1995-96.
6.3 Relationship of Buyer and Seller on Permanent Transfers
This section examines the relationship between transferors and transfer recipients in permanent QS transfers. In the tables in this section these categories were designated as "partner," "family," "friend," or "none." Note that "friend" includes "other relative" in 1995, that "family" is restricted to "personal family member" in 1995 but not in 1996, and that "none" means "no relationship."1
Table 6-3a 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. Note that no transfers occurred in Area 4E where the entire TAC was allocated to CDQs.
"None" or "no relationship" was the most likely response in all areas. In six out of the seven areas where permanent QS transfers occurred 50% or more of the QS transferred during the two year period moved between persons with no prior relationship. In each area the percent of QS transferred between persons indicating "no relationship" increased from 1995 to 1996.
The table should be read cautiously because the many respondents did not answer, especially in 1995. What may appear to be increases in QS transferred in a relationship category may in fact be due to less missing data in 1996 than in 1995.
Table 6-3b 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 those in Table 6-3a. The number of transactions with "missing" relationship information during the two years ranged from 4.8% in Area 2C to 22.3% in Area 4A.
"None" or "no relationship" was the most likely response in all areas and years except Areas 4C and 4D in 1995, among the transfer applications where the relationship question was answered. This is true for the number of transactions or the amount of QS involved in those transactions. This may reflect 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.
Table 6-3a. QS Transferred by Area, Year, and Relationship of Transfer Parties, 1995-96
Table 6-3b. QS Transfer Transactions by Area, Year, Relationship of Transfer Parties, 1995-96.
6.4 Use of Broker Services in Permanent QS Transfers
The 1995 and 1996 transfer forms asked whether or not a broker was involved in the transfer. The tables in this section look at broker involvement in permanent transfers of QS. The next section looks at broker involvement in leases. These sections examine the proportions of transfers and leases being facilitated by a broker.
Brokers were involved in a large proportion of the permanent transfers, and the number of transactions involving brokers grew from 1995 to 1996. Table 6-4a shows that brokers were involved in 44.8% of permanent transfer transactions in 1995 and in 51.3% of transactions in 1996. The table also shows that brokers were involved in the transfers of about 47.1% of the QS transferred in 1995 and in the transfers of about 64.2% of the QS transferred in 1996.2
Table 6-4b provides information on the use of brokers by management area and year. The table provides data on the amount of QS transferred by brokers and the percentage that amount represents of all of the QS transferred. The table also provides data on the number of QS transfers involving a broker and the percentage those transfers represent of all QS transfers.
As can be seen, brokers were widely used in the first two years of the program and usage generally increased from 1995 to 1996. In 1996, over 50% of the total QS transferred involved a broker in six of the seven halibut areas where permanent transfers occurred. The only exception was Area 4C where no transfers involved brokers in 1996. Excluding Area 4C, the percentage of 1996 QS transfer transactions that were made with the help of a broker ranged from 48.6% in Area 2C to 83.3% in Area 4D.
Table 6-4c provides similar information on the use of brokers over all areas by vessel category and year. In 1996, the percentage of the total QS transferred that involved a broker ranged from 44.9% in the "35 feet or less"" catcher vessel category to 75.5% in the "greater than 60 foot" catcher vessel category. Similarly, in 1996, the percentage of QS transfer transactions that were made with the help of a broker ranged from 31.0% in the "35 feet of less" vessel category to 74.1% in the "greater than 60 foot" catcher vessel category.
Table 6-4a. Use of Brokers In Halibut QS Permanent Transfers, By Year
Table 6-4b. Use of Brokers In Halibut QS Transfers, By Area and Year
Table 6-4c. Use of Brokers in Halibut QS Permanent Transfers, By Vessel Category and Year
6.5 Use of Broker Services in Lease Transfers
The tables in this section examine the extent to which brokers were involved in leases of QS during the first two years of the program. Table 6-5a looks at overall broker involvement by year and Table 6-5b looks at broker involvement by management area.
Brokers were involved in significant proportions of QS leases in each year, but their involvement fell off from 1995 to 1996. Brokers were involved in 22.6% of lease transactions in 1995, but only 9.8% in 1996. They were involved in the leases of 33.1% of the QS in 1995, but only 26.1% in 1996. In both these years brokers were involved in smaller proportions of leases than they had been in permanent transfers.3
Table 6-5b shows how broker involvement in leases varied across management areas. The percentages of leases with broker involvement were generally lower than the percentages of permanent transfers with broker involvement.
Table 6-5a. Use of Brokers in Halibut QS Leases, By Year
Table 6-5b. Use of Brokers in Halibut QS Leases, By Area and Year