6 Types of Transfers, Financing of Transfers, Relationships
between Transferees, 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 IFQ program. Copies of the transfer applications used in 1995 and 1996 can be found in Appendix II. 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 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 record.
Other sales: includes transfers where some monetary exchange occurred but where NFMS-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.
In all management areas and years, except for the Bering Sea in 1995, a majority of the QS was transferred in priced sales. In each management area over 60% of the QS was transferred in priced sales over both years combined. In all of the management areas the percent of QS transferred in priced sales rose from 1995 to 1996. In three management areas the percent of QS in priced sales transfers rose by over 20%.
The remaining columns show the amount and the percentage of each area's QS transferred in "other sales," "trades," "gifts," and "unknown" transaction types. Unknown transfer types accounted for over 20% of the QS transferred during the two years in each management area except for Southeast where they represented 18.1% of the transferred QS. The percent of transferred QS classified as "unknown" fell in five of the six management areas between 1995 and 1996.
Table 6-1b provides similar information on the number and percent of QS transfer transactions by type of exchange. "Priced sales" accounted for the highest percentage of QS transfers in all areas over both years.
Classifying these transactions is complicated by changes between 1995 and 1996 in the survey used to collect information. The 1996 transfer form moved the question on pricing higher 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. Sablefish Transfer Activity by Area, Year, and Nature of the Transfer, 1995-96
Table 6-1b. Numbers of Sablefish Transfers by Area, Year, and Nature of the Transfer, 1995-96
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. Again, since some reported more than one finance method used, the row percentages in the table total more than 100%.
In both years, personal resources were the most common finance source indicated in the Southeast, West Yakutat, Central Gulf, and Western Gulf areas. Bank financing was the most common source indicated in the Aleutian Islands and Bering Sea areas in both years. Personal resources were most important in the Western Gulf in 1995 and banks were the most important in the Western Gulf in 1996. If personal resources were not the most important source they were generally the second most important source. Likewise, if banks were not the most important source they were generally the second most important source.
Other funding sources were less important. Exceptions were "DCED or CFAB" financing in Southeast, and seller financing in Southeast and the Aleutian Islands. It was common for information to be missing in Southeast, West Yakutat, and the Central Gulf in 1995, but it was less common for information to be missing in 1996, except in Southeast. Even there the incidence of missing information was cut in half.
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.
The reader should view the results in these tables cautiously. Changes in questions between the 1995 and 1996 transfer forms and the substantial number of "missing" responses in 1995 could have affected the results.
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 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," respectively. 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.
"None" or "no relationship" was the most likely response over the two years in all areas, among the transfer applications where the relationship question was answered. This may indicate 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 table should be read cautiously because many respondents did not answer. Over the two year period, the percentage of QS involved in transfers where the relationship between the buyer and seller was not provided ranged from 12.1% in Southeast to 19.8% in the Bering Sea.
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.
Table 6-3a. QS Transfer Transactions by Area, Year, Relationship of Transfer Parties, 1995-96
Table 6-3b. QS Transfer Transactions by Area, Year, Relationship of Transfer Parties, 1995-96
The transfer forms used in 1995 and 1996 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.
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 38.8% of permanent transactions in 1995 and in 53.1% of permanent transactions in 1996. The table also shows that brokers handled transactions involving 44.9% of the QS transferred in 1995 and 71.4% 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 1995, the percentage of transfers in which brokers were involved ranged from 20.0% in the Aleutian Islands area to 42.9% in the Central Gulf area. In 1996 the percentages ranged from 48.6% in the Southeast area to 62.5% in the Bering Sea area.
Table 6-4c provides similar information on the use of brokers over all areas by vessel category and year. The percentage of transactions and the total QS transferred that involved brokers were high in all vessel categories and rose in each category from 1995 to 1996. The 1996 percentages of broker involvement in transactions ranged from 46.2% for the "less than or equal to 60 foot" catcher vessels to 88.2% for the freezer vessels.
Table 6-4a. Use of Brokers in Sablefish QS Permanent Transfers, By Year
Table 6-4b. Use of Brokers in Sablefish QS Permanent Transfers, By Area and Year
Table 6-4c. Use of Brokers In Sablefish 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 are involved in leases of QS. Table 6-5a looks at overall broker use by year and Table 6-5b looks at broker use by management area.
Table 6-5a provides summary data over all areas. The table shows that brokers were involved in 35.1% of all lease transactions in 1995 and in 35.3% of all lease transactions in 1996. Brokers handled transactions involving 49.2% of all QS leased in 1995 and 72.7% of all QS leased in 1996.3
Table 6-5b shows that broker involvement in leases also varied across management areas and vessel classes. In 1995, brokers handled from 18.8% of the lease transactions in the Southeast area to 62.5% of the lease transactions in the Bering Sea area. In 1996, brokers handled from 15.4% of the lease transactions in the Central Gulf area to 100% of the lease transactions in the Western Gulf. However, as noted in Chapter 5 there were relatively few leases in the first two years of the program.
Table 6-5a. Use of Brokers in Sablefish QS Leases, by Year
Table 6-5b. Use of Brokers In Sablefish QS Leases, By Area and Year