Quota Balancing and Cashflow
July 2000 - Updated Oct 2000
April year stocks (SBW) lose the overfish right on 1 Oct 2001. If you are overfished at that time, and don't buy in ACE by the 15th of November 2001 - you will receive a deemed value invoice.
The 96 Act changed significantly late last year.
For people who had made catch plans based upon the 96 Act as it was from 96 through to late 99, there are some major changes.
The simple explanation goes like this:
Thus – if you go into the ACE system with any over fishing, the amount of that over fishing will come off the ACE you have available in that first year. To catch more fish you will have to buy in ACE from someone else.
If you are already in a fully over fished situation, you can reduce the cash flow impact of that by leasing in some quota this year and some next year. You could choose to spread the impact over three years, or you could take the hit in any one year. Alternatively you could choose to carry on and take the risk that ACE will be available to buy in the first year under the ACE system. The choice is yours.
If you are planning to spread the impact, and you intend to lease in this year, but you have already fully caught your over fish right, then a simple lease wont help you (it would revert uncaught).
If you find yourself in that position, it can be overcome, and you need to know what you are doing. Basically you must lease out the portion of quota that you wish to reduce your over fishing by to someone who wont catch it – ensuring that the lease expires prior to the end of the year, and will therefore revert. Leasing to a quota holding company will achieve that. Then you must (in the same month as the lease out, and before September) lease in the quota you are going to use. This will ensure the catch gets transferred from your quota to the lease inwards, and you will get your over-fish rights back when your unused lease reverts at the end of the year.
If that didn’t make much sense, then try looking at the diagrams below.
This first diagram shows the situation we have now under the ’83 Act.
This shows the basic right consisting of 100% of the value of your ITQ being made up of three parts – red, blue and green – plus the added flexibility of under and over fish rights from other years.
The green bit is the under-fishing right.
The red part is the over-fishing right.
The blue bit is what you always (and only) get in the current year.
The first two bits are determined by what you did in the previous year, the last two by what you do in this year.
The first green bit (AB) is under-fish from the previous year. To get it you must not have caught it in the previous year.
The first red bit (BC) is the previous year’s over-fish right. If you over fished in the previous year you don’t get this in the current year.
You always get the blue bit (CD) regardless of what else you did or will do, and it only has effect in the current year.
The second green bit (DE) is what you can fish in this year, but if you don’t it will carry forward and will be available next year.
The second red bit (EF) is the over-fish right, that you can use, but if you do then it will not be available in the next year.
Thus - if you start a year fully under fished, and end it fully over fished, you could have caught 120% of the basic right in that year, but you couldn’t do it again the next year.
Conversely, if you started the year fully over fished, and ended it fully under fished, you would only have caught 80% of your basic right. This would give you the option of going to 120% the following year.
As shown in the bottom graph (above), this flexibility between years doesn’t give anyone any more quota over time, it just introduces some flexibility as to when people can catch it.
The situation under the ’96 Act is quite different.
The over fish right (the red bit) has gone.
There is a little of the red shown, but it occurs only in the transition year, and is actually the over fish right under the ’83 Act. If you over fish in the year prior to the introduction of the ’96 Act balancing regime, then you will not receive that ACE which would have been equivalent to the over fish right.
The ’96 Act retains the green bit – the under fish right (section 67A).
This right allows you to carry forward un-used ACE up to 10% into the next year. Section 340A allows the ’83 Act under fish right to be given effect under ACE.
There are two exceptions:
The net result of this is that the amount of flexibility in the system has been reduced by half.
The ACE system will start in October 2001.
Thus you have this and next year under the 1983 Act, and following that under the 1996 Act balancing regimes, with the transition year occurring 1 Oct 2001 – 30 Sept 2002.
Think about it – it will affect your business.
1 Maui St, Kaikoura, New Zealand