Preserving the Independence of the Inshore Fleet in Canada's Atlantic Fisheries

Public Consultations - Gaspé, QC - January 27, 2004
Draft Summary

Overall Summary of the Session

• Broad support for owner-operator and fleet separation policies to prevent processors from controlling licences and support for a regulation that is adapted to reality.
• Given the resource situation with cod and crab, fishers are looking for some flexibility to combine licenses on a single vessel. They are also concerned that the downturn in the resource will encourage further control of the inshore fleet through trust agreements.
• Participants wanted governments and departments within the federal government to work more closely together to find a solution to the problems of intergenerational transfer of licences, trust agreements, etc.
• Fair sharing of the resource will reduce the temptation for fishers to resort to trust agreements with processors. Some called on DFO to be more stringent with the licence transfers rules to stop the flow of licences away from areas like the Lower North Shore.
• Participants wanted the federal government to be more like the Province of Quebec with respect to capital gains tax exemption and financing programs, loan guarantees, for gear, vessels, licenses to fishers to assist intergenerational transfers
• Other issues raised included questions about status of AFPR, how to influence oil and gas exploration, seismic testing and the Beldune, NB incinerator project and the problems with many jurisdictions in this area.

Summary of formal written presentations

• Commercial fishing is an important economic activity in Quebec maritime communities. Over the years, the industry has changed and regulations must now change in consequence.
• In fact, in the communities, a fisher is also a fishing enterprise, an enterprise that hires staff and maintains an infrastructure. Fishing is a business – fishers make investments and take risks to achieve short and long term viability. To succeed, this business needs to know that the resource will be protected and exploited sustainably. It also needs the regulatory and financial arrangements that help its development
• The work being done by the Atlantic Fisheries Policy Review constitutes the occasion to update the policies and regulations and to provide fishers with the tools they need for the 21st century.
• We have not been able to hold extensive consultations on the discussion document, thus my comments today are a first reaction to the document. We would appreciate the opportunity to submit in-depth comments in the coming weeks.
• The objectives of the owner-operator and fleet separation policies should be maintained. These policies strive to protect the inshore fleet from control by other interests, such as processors, by separating the harvesting and processing sectors.
• Fishing licences and beneficial interest must stay with professional fishers. There should be a focus on professional fishers and ways to preserve access of independent, professional fishers to the resource.
• Fishing licences and beneficial interest must be linked in a way such that those outside the commercial fishing industry cannot become licence holders.
• Over the last number of years, the fishery has evolved and fishers need the tools necessary to ensure the development of their sector. Maintenance of the owner-operator and fleet separation policies is essential to allow fishers to progress as owners and employers – they need to be able to manage their company.
• DFO should work with CCRA to put into place a system whereby fishers are treated equally on the question of taxes. DFO must make a distinction between a company owned and controlled by professional fishers and others controlled by a processor or third party (the latter being unacceptable). Professional fishers must be able to control their corporations.
• Fishing enterprises are family operations. Most of the licences will be transferred from father to son or daughter, often for many generations. Because of this, they have strong interest in protecting the resource. We need a mechanism to ensure that these intergenerational transfers can happen.
• The Federal Government should follow the example set by the Province of Quebec and allow a capital gains tax exemption, similar to that offered in the agricultural sector.
• Captains should be able to name designated operators, as long as the other captain is a professional fish harvester, but in such a way as it does not encourage licence concentration.
• The absence of a firm regulation on the practical application of the owner-operator and fleet separation policies has caused many “illegal” situations to develop.
• DFO should wait until the AFPR is finalized and released before taking decisions that may have negative impacts on fishers. Until then, ways must be found to slow down the proliferation of trust agreements that undermine existing policies.
• DFO should pay particular attention to existing trust agreements and establish a new policy such that it does not penalise fishers who entered into agreements to further the economic viability of their enterprise.
• DFO should clearly and publicly state its intentions to reinforce the owner-operator and fleet separation policies to make it easier for fisheries to take decisions that must be taken.
• We believe that it would be worthwhile to create a working group of DFO, industry and experts to work specifically on this file. The group would be mandated to develop possible scenarios to achieve the stated objectives.
   
• A fishing licence should belong to an individual, not a company.
• If trust agreements are being used only to finance the purchase of a licence or enterprise, without separating beneficial use from legal title, or directing the use of the licence, this should be allowed.
• The main problem is concentration of licenses; but we need multi-licensed vessels. We should be allowed to “buddy-up” - it is more efficient and economical if two people with two licenses fish off same vessel. Need to be able to have viable operations and this is one way of achieving it.

Following presentations by registered speakers, a round table discussion of the issues raised in the discussion document was held. The following is a summary of that session.

Open Discussion – Trust Agreements

• There are lots of trust agreements and it is important that the fisher remains in control of the licence; some trust agreements should give us cause for concern.
• I have great concerns about trust agreements; it is imperative that fishers control the harvesting of the resource by retaining control of their licences – a third party should not be able to control the use of a licence; we have been clear on this point, and have made our views known on many occasions.
• Trust agreements, owner-operator and fleet separation policies must not destroy the effort being made to conserve the resource.
• We know that in Nova Scotia trust agreements, not harvesters, are controlling the resource. In Quebec the situation is different. In 1983, corporations had permits and retained licenses, although there were not many in Quebec, and those that existed have gradually transferred to professional owner-operators. In the groundfish sector in particular, trust agreements only exist to make money.
• Many have entered into trust agreements to facilitate intergenerational transfers as the financial implications of a direct transfer are too great. These trust agreements are not damaging because the legal title and beneficial interest remain together. However, the licence continues to belong to the father but is being run by the son. This problem would be lessened if we had the same benefits as the agriculture sector where the family takes over the business without “unreasonable” impacts. This is why we ask Ottawa to adopt capital gains exemption of $500k.
• It is good to see that DFO acknowledges the importance of preserving the independence of the inshore fleet and its economic viability. One way for fishers to achieve economic viability is a fairer system of distributing the resource – some fishers make millions while others are under the poverty threshold. It is those who have no choice who go to the processors for financing, enter into trust agreements, and become employees of the processor.
• DFO could avoid trust agreements if a fairer percentage of the allocation was given to the inshore fleet, reasonable revenues would mean fishers wouldn’t have to get funding from processors.
• Intergenerational transfers – same problem with lobster fishers in the <50 foot fleet. Following the Marshall decision, many licences went to Aboriginal groups which raised the value of the licences, which becomes problematic if a fisher wishes to transfer his licence – they are taxed on the value of the licence. If there was a way that they could find financing elsewhere, they would not need to seek financing from processors. We are lucky in Quebec because the value of a licence can be borrowed against, which allows young fishers into the fishery. We should have the same tax treatment as the agricultural sector.
• One of the main problems is the nature of the resource, because it is a common property, we don’t own it, we can just access it; so financing the purchase of a licence through financial institutions becomes an issue.
• The Government of Quebec should play a role in the solution to trust agreements – it is the province that gives processing licences and financing to fishers. Quebec has a public process for applying for a processing licence, albeit a slow one, if a processor is not persistent with their request for a licence, they could be discouraged.
• Your orientation is clear - to preserve the independence of the inshore fleet - but we need to be more practical. There are all sorts of fisheries problems (cod etc.) and fishers are more likely to come under the influence of others when they are in a financial crisis and others are ready to take advantage of them.
• The focus of the document is good, but we really need to fix the problem quickly because it will proliferate. Licences are already leaving Quebec. This is a large issue and includes capital gains tax exemption; professional fish harvesters, allowance for intergenerational transfers, and there may be other issues too.
• DFO should take steps to amend the regulations to give them the legislative tools required to protect the policies, although there might be other ways to deal with the problem – this should be explored.
• A working group is supported, composed of representatives from the Federal Government, Provinces and industry – it would be good to see what options exist and to take an in-depth look at all the issues. The current direction is definitely excellent.
• When we received the document we were surprised and disappointed that the document was more interrogative than consultative. You present the facts, but it is not clear how you will package the issues. In particular, it is hard to see how to deal with trust agreements, particularly since we do not hear about them until it is too late.
• Maybe we could use the legal experience in the federal government (the Department of Justice), to delve further into the issue. Any changes that are adopted will have to stand the test of time and must be truly appropriate and must protect the inshore fishermen.
• Licences were initially issued to develop a region. As long as it is possible to transfer licences within a whole province, it is difficult to say which region will survive. What we see in the lower north shore is purchasing between regions and we lose out in both transfers. DFO should keep licences in a specific area and only issue licences to people living. This is the way it is done in Labrador, and that policy should be applied across the board. In issuing licences, DFO should consider the needs of the community.
• Trust agreements are used to remain competitive; if funding is not provided by a plant that will keep the enterprise alive, I will pull out of fishing. If government would determine an allocation based on community needs, this might allow for better management of the resource and fishermen would be more involved in the decision-making processes.
• In BC where stacking is allowed, there was double stacking in fishing fleet, salmon, herring and at the end of this process, 50% of inshore fleet disappeared, and the majority of salmon licences are now in the hands of packers. Even if there is a person there fishing the licence, the trust runs the whole thing. This is why we have a really hard time with trust agreements.
• We try to tell people to find alternative sources of financing but when no alternative exists, a fisher has to resort to trust agreements. When he has a choice, he should be allowed a free hand to manage his business as he sees fit, to preserve the long term health of the resource. The fishers we represent are not interested in having a situation where the people who fund a fishing operation have more say than the fisherman. But that is American model and we know what it has done in US, NZ, western Canada - we don’t want that model here in Eastern Canada. We will fight against it - we know what happens to the resource when people only motivated by profit.
• Because of these policies, the Government of Quebec set up loan guarantees to allow for licence purchases, etc., that are only available to licence holders. The Government does its best to control under the table agreements but it can only act within the tools it has.
• By setting up loans for fishers, surely the Province is acting similar to a party to a trust agreement – by loaning the money, the licence is given as a guarantee against default.
• While some might interpret the financing this way, it was only introduced to protect fishermen and allow the licences to stay in Quebec.

Open Discussion –Owner-Operator and Fleet Separation Policies

• To allow some fishers to become more economically viable, “buddy-up” should be allowed in certain fisheries. The owner-operator and fleet separation policies should be put into the regulations to ensure that it is the licence owner who fishes the licence; this is particularly important in the lobster fishery.
• The discussion document asks us to consider how other fleets or non-resource users should be consulted. It is unclear who this refers to – are we going to involve Greenpeace in consultations? We have enough trouble among ourselves without adding others to the process. It is unclear if the views of the commercial users will be adequately considered. It is hard to see how this consultation process would work.
• Other issues are equally as important. For example seismic testing – what are the rules? Fishers don’t know what the impact may be on stocks and don’t know where to raise their concerns or what process to follow. If seismic testing is harmful to the fishing grounds - how will they get compensation? It seems that other government departments take decisions that are bad for the resource and do not give fishermen the opportunity to provide their advice – maybe what the government should consider is a “water plan” for management of the oceans. Another issue is the Beldune incinerator – fishermen and their organizations should be given the opportunity to offer their comments.