Legislature(1999 - 2000)
02/28/2000 05:10 PM House FSH
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE SPECIAL COMMITTEE ON FISHERIES
February 28, 2000
5:10 p.m.
MEMBERS PRESENT
Representative John Harris, Co-Chair
Representative Carl Morgan, Co-Chair
Representative Fred Dyson
Representative Jim Whitaker
Representative Bill Hudson
Representative Mary Kapsner
Representative Hal Smalley
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
HOUSE BILL NO. 363
"An Act relating to salmon product reports; and providing for an
effective date."
- HEARD AND HELD
PREVIOUS ACTION
BILL: HB 363
SHORT TITLE: SALMON PRICE REPORTS
Jrn-Date Jrn-Page Action
2/11/00 2177 (H) READ THE FIRST TIME - REFERRALS
2/11/00 2177 (H) FSH, FIN
2/11/00 2177 (H) REFERRED TO FSH
2/28/00 (H) FSH AT 5:00 PM CAPITOL 124
WITNESS REGISTER
REPRESENTATIVE ALAN AUSTERMAN
Alaska State Legislature
Capitol Building, Room 434
Juneau, Alaska 99801
POSITION STATEMENT: Sponsor of HB 363.
LARRY PERSILY, Deputy Commissioner
Office of the Commissioner
Department of Revenue
PO Box 110405
Juneau, Alaska 99811-0405
POSITION STATEMENT: Testified on HB 363.
MAC MEINERS, Salmon Fisher
(Address not provided)
Juneau, Alaska 99801
POSITION STATEMENT: Testified in support of HB 363.
KRIS NOROSZ, Representative
Icicle Seafoods, Inc.
PO Box 1147
Petersburg, Alaska 99833
POSITION STATEMENT: Testified in opposition to HB 363.
JOE KYLE, Representative
Trident Seafoods Corporation
5011 Jewel Lake, Suite 203
Anchorage, Alaska 99502
POSITION STATEMENT: Testified in opposition to HB 363.
DAVID FORBUSH, Representative
Wards Cove Packing Company
PO Box 7480
Ketchikan, Alaska 99901
POSITION STATEMENT: Testified in opposition to HB 363.
VIC JONES
PO Box 1831
Cordova, Alaska 99574
POSITION STATEMENT: Testified in support of HB 363.
JOHN RENNER, Fisher
PO Box 756
Cordova, Alaska 99574
POSITION STATEMENT: Testified in support of HB 363.
DOUGLAS DONEGAN, Vice President
Trident Seafoods Corporation
5011 Spenard Road, Suite 203
Anchorage, Alaska 99517
POSITION STATEMENT: Testified in opposition to HB 363.
NICK KOURIS, Bristol Bay Fisher
2101 West 29th Avenue
Anchorage, Alaska 99517
POSITION STATEMENT: Testified in support of HB 363.
SUSAN ASPELUND, Executive Director
Cordova District Fishermen United
PO Box 939
Cordova, Alaska 99574
POSITION STATEMENT: Testified in support of HB 363.
JACK KEANE, Bristol Bay Fisher
2152 Dawson Street
Anchorage, Alaska 99503
POSITION STATEMENT: Testified on HB 363.
KEVIN ADAMS, Bristol Bay Fisher
2055 Saratoga Drive
Anchorage, Alaska 99517
POSITION STATEMENT: Testified on HB 363.
PAT HARDINA, Controller
Cook Inlet Processing Inc.
PO Box 8163
Nikiski, Alaska 99635
POSITION STATEMENT: Testified on HB 363.
BRUCE SCHACTLER, President
United Salmon Association
PO Box 2254
Kodiak, Alaska 99615-2254
POSITION STATEMENT: Testified on HB 363.
TOM WISCHER, Kodiak Fisher
PO Box 202
Kodiak, Alaska 99615-0202
POSITION STATEMENT: Testified on HB 363.
MATT MOIR, Representative
Alaska Pacific Seafoods
PO Box 4306
Kodiak, Alaska 99615-4306
POSITION STATEMENT: Testified on HB 363.
BILL LINDOW, Representative
Copper River Salmon Producers Association
PO Box 1612
Cordova, Alaska 99574
POSITION STATEMENT: Testified on HB 363.
SCOTT McALLISTER, Representative
United Salmon Association
PO Box 762
Kodiak, Alaska 99615
POSITION STATEMENT: Testified on HB 363.
JOANIE WALLER, Staff
to Representative Alan Austerman
Alaska State Legislature
Capitol Building, Room 434
Juneau, Alaska 99801
POSITION STATEMENT: Answered questions regarding the amendments to
HB 363.
ACTION NARRATIVE
TAPE 00-03, SIDE A
Number 0001
CO-CHAIRMAN JOHN HARRIS called the House Special Committee on
Fisheries meeting to order at 5:10 p.m. Members present at the
call to order were Representatives Harris, Morgan, Dyson, Hudson,
Kapsner and Smalley. Representative Whitaker arrived as the
meeting was in progress.
HB 363 - SALMON PRICE REPORTS
CO-CHAIRMAN HARRIS announced the first order of business as House
Bill 363, "An Act relating to salmon product reports; and providing
for an effective date."
Number 0054
REPRESENTATIVE ALAN AUSTERMAN, Alaska State Legislature, came
before the committee as sponsor of HB 363. He introduced the
legislation, he said, at the request of the United Salmon
Association. It updates the current reporting requirements for
salmon to include all products that are being produced. The
current report deals strictly with canned salmon, yet the changes
in the industry over the years have become so important that it is
time to include all product types - fresh, frozen and roe. He
pointed out that not only the processors use this type of
information but many private firms and the university use it as
well. He could also envision this type of information translating
into more tax revenues for the state in relation to ex-vessel
value. He has one proposed amendment that he would like to see
incorporated.
Number 0338
REPRESENTATIVE FRED DYSON expressed that he has heard criticism
from processors in regards to disclosing this type of information
as proprietary information, which compromises their position in the
market.
REPRESENTATIVE AUSTERMAN answered that processors are already
reporting data for canned and thermally processed salmon. He has
never heard of a problem with confidentiality. In fact, when the
issue of reporting thermally processed salmon was taken up last
year, there was no effort to eliminate that information due to
concerns of confidentiality or impact on the market.
CO-CHAIRMAN HARRIS opened the meeting to public testimony.
Number 0639
LARRY PERSILY, Deputy Commissioner, Office of the Commissioner,
Department of Revenue, came before the committee to testify. The
department doesn't have a position on whether or not the data
should be collected; they simply don't believe that it should be a
function of the Department of Revenue. The department has worked
a lot with the legislature over the years to refine their mission
statement to include work related to the collection of taxes; they
do not feel that there is a direct relationship between collecting
this data and taxes. If this is fisheries data, he said, then it
should be within the Department of Fish & Game. If this is an
economic development to get more information to fishers, then it
should be within the Department of Community & Economic
Development. Nevertheless, if this function is placed within the
Department of Revenue, it would take the equivalent of two staff
positions to gather, input, and produce the reports. The
department, however, is willing to work with the sponsor to help
reduce that fiscal impact. For example, a consolidation of
reporting areas, or electronic reporting would help reduce the
amount of manpower needed. The department, however, is still
looking at another staff position.
Number 0809
CO-CHAIRMAN HARRIS asked Mr. Persily how much would electronic
reporting affect the department's fiscal note.
MR. PERSILY replied it would reduce it by about $22,000, which
could be "shaved" a little more if the reporting areas were
consolidated. In that way, there are fewer numbers to work with.
Number 0866
CO-CHAIRMAN HARRIS asked Mr. Persily whether he thinks that this
function should fall under the Department of Fish & Game rather
than the Department of Revenue.
MR. PERSILY replied this function should fall under the Department
of Fish & Game, if the data is important for fishery management.
Similarly, this function should fall under the Department of
Community & Economic Development, if the data is a matter of
economic development, fishers getting the best price, and promoting
the industry. The numbers may be good to gather for statistics, he
said, and they may have a purpose, but the Department of Revenue is
not the place; the data is not directly related to taxes.
Number 0950
MAC MEINERS, Salmon Fisher, came before the committee to testify.
He said, "I just want to register my support of House Bill 363."
REPRESENTATIVE DYSON asked Mr. Meiners how this bill would help
him.
MR. MEINERS replied, he thinks, it would help him make a little bit
more money. It would hold processors accountable and fishers would
really find out what the salmon are worth. Right now, fishers get
a story. Furthermore, this would help generate more tax revenues
for the state; salmon fishers are one of few who pay taxes in this
state.
Number 1018
REPRESENTATIVE DYSON asked Mr. Meiners how the state would get more
tax revenues.
MR. MEINERS replied, if 1 cent is accounted for in the pink salmon
fishery, for example, it would equate to about $400,000 to $500,000
in extra revenues, which would also put more money "into his
pocket."
Number 1065
REPRESENTATIVE DYSON asked Mr. Meiners whether he's acting on the
theory that processors aren't being honest with fishers.
MR. MEINERS replied, "You hear so many stories." He'd like to
follow his fish after dropping them off in the tramper to find out
the truth.
REPRESENTATIVE DYSON asked Mr. Meiners whether this legislation
would help fishers get to the truth.
MR. MEINERS replied, "I hope so. It's a start."
Number 1124
REPRESENTATIVE JIM WHITAKER asked Mr. Meiners whether he could
utilize the information that would be generated by this legislation
as a bargaining tool.
MR. MEINERS replied, "Hopefully." He's a small businessman, so he
looks at revenues for the next year and plans accordingly. Yes, it
would help.
REPRESENTATIVE WHITAKER asked Mr. Meiners whether the data would be
a year old.
MR. MEINERS replied, "Hopefully not." He's hoping that this
legislation would allow for earlier reporting.
Number 1187
CO-CHAIRMAN HARRIS stated processors are concerned that this would
"drive up" their costs and in essence "drive down" the amount of
money that they could pay fishers. He asked Mr. Meiners whether he
could see that happening.
MR. MEINERS replied, "No. I really don't." This is the modern
age. Information goes into computers. Sure, there are a few trade
secrets, but he only hears the tales and excuses: the fish were
too big, the fish were too oily, etc.
Number 1322
KRIS NOROSZ, Representative, Icicle Seafood, Inc., came before the
committee to testify. There are about 12 processors, she said,
that have to produce a report for thermally processes salmon. This
legislation would increase that number to 70 or 80. She further
noted that this legislation would require a report by area of
production, which would be extremely difficult if not impossible to
produce because during peak periods fish are transferred to
different plants around the state for processing. Moreover, fish
are tracked through tickets, but once they reach the plants they
are not kept separated. She said,
We don't know that, you know, this tote of pink salmon
from Prince William Sound went into a can and this tote
may have been frozen. We can't physically do it. When
we're at peak production we can't keep things separate
like that. We might be able to keep track of the
difference in the fish going into cans, but in terms of
all the different product types we do, we just can't do
it. And we certainly don't do it in terms of our
paperwork.
MS. NOROSZ further stated that she sees this legislation as an
extremely onerous burden that Icicle probably couldn't meet, even
if required. They would have to reduce their production and
fishers wouldn't like to hear that they couldn't take their fish.
Number 1512
MS. NOROSZ further stated that the data regarding quantity, prices
and product type is proprietary information, even gathered in the
aggregate. It's amazing how much customers already know, but they
don't know the mix in terms of frozen, fresh, fillet or roe. She
said,
And I think that sometimes you have to be careful for
what you ask for because once this information becomes
public to the fishermen, it also becomes public to our
customers. And I think we could end up with some
unintended consequences that it's going to hurt both
fishermen and processors in terms of price.
MS. NOROSZ further stated that she understands the desire for
additional information, but there is a lot out there that could be
gleaned through market reports, for example. It's a guessing game
for processors as well. She said,
I don't think that you should be led to believe that if
you know the quantity of the fish and the wholesale price
that you can figure out what profits are. And it's
really difficult for me to sit here and feel like
everyone feels like they're being ripped off. I think
the processing game is a lot harder than some people
might realize, and I think that we've certainly seen over
the years a lot of people go out of business. And if it
was that easy, I think, more people would be jumping into
the business rather than involuntarily getting out of the
business.
Number 1689
MS. NOROSZ further stated that processors like fishers are price
takers, not price setters. Processors try to anticipate prices for
their products, which is how a commodity market works. She further
stated it seems that the impetus for this change is emanating from
the Kodiak area.
MS. NOROSZ further stated that fishers need to talk to their
processors. If they aren't happy with their processor, they need
to look for another one. She noted that Icicle has offered
different types of programs that share in the profits to their
fishers. She cited that some fishers in Southeast Alaska signed up
for such a program and ended up being a half cent less in the end
compared to the price offered to the rest of the fleet. As a
result, many fishers did not sign up again for that program. In
conclusion, she said, that communication is important between
fishers and processors, but this legislation does not get those
involved to where they need to go.
Number 1789
REPRESENTATIVE DYSON stated, as a fisher in Bristol Bay, he
delivered his fish to the same processor for many years because he
felt that he could trust them, but he did not know what he would
get for them. He is amazed at how processors can pay within 2
cents to 4 cents per pound of each other. He said,
We worry that you all get together at Pebble Beach or
somewhere in a cocktail room and say let's tell these
guys what the price was, back in the days when it was
just a half a dozen of shore-based processors.
REPRESENTATIVE DYSON further stated it's hard to believe that there
isn't collusion, but there might not be since they all sell in the
same market. He further stated that Ms. Norosz' point of tracking
this information is valid, especially since there is confusion when
the salmon are running. He asked Ms. Norosz whether she has an
alternative suggestion.
MS. NOROSZ replied she wants to make it very clear that Icicle
Seafoods has not been involved in any way in collusion, for it is
illegal. The solution, she said, is better communication. It's
easy to point a finger at fault, but the fact of the matter is, a
commodity market involves many factors that processors do not have
power over. Furthermore, the salmon market has changed. Alaska is
not the only source of salmon anymore. There is competition, which
has created a tough environment for business.
Number 2064
REPRESENTATIVE DYSON asked Ms. Norosz and Mr. Kyle [Trident
Seafoods Corporation] to indicate to the committee members the
length of time processors hold fish. He has noticed that they
often hold them until the time is right to sell.
JOE KYLE, Representative, Trident Seafoods Corporation, came before
the committee to answer Representative Dyson's question. The time,
he said, can be anywhere from right away to months. Fish can be
held for months in the hope that the market turns in a favorable
direction, but that's not always the case. As a result, product
and inventory may not be sold in time to meet the date and time
requirements for reporting purposes.
Number 2131
REPRESENTATIVE WHITAKER asked Ms. Norosz how many processors there
are in each fishery.
MS. NOROSZ replied, at the present time, 12 processors are required
to report on thermally processed salmon. This legislation would
include a lot more, but she's not sure of the exact number. She
has been told that the number would be between 70 and 80.
REPRESENTATIVE WHITAKER asked Ms. Norosz whether she is aware of a
fishery with one processor.
MS. NOROSZ replied she's not aware of a fishery with one processor,
but there might be some that concentrate on a specialty value-added
product. There are hundreds of salmon buyers, she explained, that
buy different quantities and make different products.
REPRESENTATIVE WHITAKER indicated that he is looking for the rule
and not the exception. He asked Ms. Norosz whether, in general,
there is competition amongst processors.
MS. NOROSZ replied, "Yes."
REPRESENTATIVE WHITAKER indicated that processors are stuck in the
middle. He said,
So, you compete for the product both in terms of supply
and sales. You buy it, and you compete to buy it for the
best price that you can, and then you compete to sell it
for the best price that you can. You're stuck in the
middle. Right?
MS. NOROSZ replied, "Yes." She further stated that Icicle Seafoods
was started over 35 years ago by a group of fishers who were
disgruntled with the salmon markets and processors available at the
time. The company is still held by fishers and the majority of
stock holders on its board of directors are fishers.
REPRESENTATIVE WHITAKER said, if this law went into effect,
suppliers would know what the product is being sold for, and
customers would know what the product is being bought for. It
appears that this would put processors into a tight market dynamic.
MS. NOROSZ replied absolutely. Processors would get it from both
ends. In addition, customers would know what they produce, what
they hold in inventory, and what they have been selling products
for.
Number 2331
REPRESENTATIVE AUSTERMAN pointed out that the reporting
requirements provide for at least three processors in an area in
order for this information to be distributed. In other words, if
there are only two processors in an area, then the Department of
Revenue cannot give this information out.
REPRESENTATIVE DYSON pointed out, for the record, that he does not
want anybody to infer that he has or had any knowledge about
collusion. He said,
We fishermen, who are not all that bright sometimes, are
just amazed by the coincidences. Maybe, it's the market
forces that drive it in that direction.
REPRESENTATIVE MARY KAPSNER stated, for the record, that there is
room for only one processor on the Kuskokwim River; the fishery is
failing.
Number 2415
CO-CHAIRMAN HARRIS referred to a meeting in November and indicated
that he believes this legislation is before the committee because
of a mistrust of processors on the part of fishing groups. They
feel that they don't get enough information in a timely fashion out
of the Commercial Operators Annual Report [COAR], which is probably
accurate. He asked Ms. Norosz to elaborate on why she thinks
that's true.
MS. NOROSZ replied the frustration at that meeting was shared by
both processors and fishers. She said,
What I felt came out of that meeting was a commitment to
try to streamline that report to make it more uniformed
in terms of the definitions of the type of product forms
that were being reported. So, that there wasn't six
million pounds of a 'miscellaneous' category. So, that
people knew what those products were. And there's been
a work group that has been put together to do just that.
The other thing that came out of there was the desire to
do electronic reporting, realizing that that would speed
the process up for tabulating the results and getting the
results out to the public a lot quicker. I've had
indications--indications have been made that that should
be what happens by April of 2001. I know that the
federal government is putting a lot of money into this
idea of electronic reporting, so I think that in another
year we're going to start getting information in a more
usable form and a quicker manner.
But I do still think that there's frustration between
fishermen and processors, and I think that's, once again,
is an issue where we need better communication. But I
think part of where that frustration is emanating from is
that there's a lot of factors that influence our markets
to which we have no power over, and the fisherman has no
power over. And that is really frustrating. We don't
have any power over the consumers. We don't have any
power over the exchange rate for currencies, especially
in Japan. We don't have any control over world salmon
supply and how much farm salmon is being produced and so
that leads to a high level of frustration. But that's
not something that I, as a processor or Joe as a
processor, can change. We've got to learn to live with
it, and hopefully fishermen and processors in Alaska can
learn to work together better so that we can promote
Alaskan salmon. But I don't think this bill gets us
there. I think it's going to be detrimental.
Number 2603
REPRESENTATIVE WHITAKER asked Ms. Norosz whether Icicle Seafoods
processes farmed salmon obtain elsewhere.
MS. NOROSZ replied in the negative. She pointed out, however, that
Icicle Seafoods has done some secondary processing for customers
upon request.
Number 2649
DAVID FORBUSH, Representative, Wards Cove Packing Company,
testified via teleconference from an undetermined location.
Currently, 12 processors report on 13 different products to the
state for canned salmon, and roughly 98 processors would qualify
under this legislation. They would have to report on 35 different
products.
MR. FORBUSH further stated, in reference to the COAR, the Pacific
Seafood Processors Association has submitted a proposal on
electronic reporting to the Department of Fish & Game in order to
help speed up and improve reporting information. He pointed out
that everything this legislation asks for Wards Cove does once a
year in the COAR, which is sent in by April 1 of the following year
that a product is produced. In general, it takes the Department of
Fish & Game three to four months to process that information.
There is frustration in terms of timeliness, he said, but that
report deals with all 400 processors throughout the state.
MR. FORBUSH further pointed out that this legislation requires
three areas of reporting. The first area is a bar code, which
would report the date, plant location, gear type, species, and what
was done to the product. A bar code program would cost about
$10,000 per location, while the bar code equipment would cost about
$6,000 per line. A large processor would need roughly six lines,
a medium size processor would need roughly three lines, and a small
processor would need roughly one line. The average cost for a
large processor would be $46,000, for a medium size processor
$28,000, and for a small processor $16,000. In total, he noted a
cost of $200,978,000.
MR. FORBUSH explained that the second area is a software inventory
system, which would cost about $30,000.
MR. FORBUSH explained that the third area is a billing sales system
that would bill, report taxes, and generate the report required
under this legislation. He pointed out that this is not a
cost-by-plant, but a cost-by-corporation, which would equate to
$1.5 million. In the end, the total cost to seafood plants would
be roughly $400,478,000.
MR. FORBUSH further pointed out that electronic reporting would
allow for transmission within one to two weeks after each reporting
period. The question is, How long would it take the state to
process that volume of information?
TAPE 00-03, SIDE B
Number 0001
MR. FORBUSH continued. In conclusion, Wards Cove Packing is
opposed to this legislation. There is no advantage for this type
of reporting, especially since the information is already made
available at the end of the year in the COAR.
Number 2942
REPRESENTATIVE DYSON asked Mr. Forbush whether it would be
attractive to the industry if the state was to make a low-interest
loan available for the necessary equipment.
MR. FORBUSH replied that he can't see an advantage or a need from
a company standpoint to make this information available, especially
since it's an accounting function that is already done at the end
of the year. He noted that the sales department gets their
information on the marketplace from customers and trade materials.
In other words, they don't read numbers to get the information that
they need.
Number 2837
VIC JONES testified via teleconference from Cordova. He supports
this legislation. It would be good, he said, for all fishers. It
would provide for timely reporting of wholesale prices, and reflect
all production, not just canned production.
Number 2807
JOHN RENNER, Fisher, testified via teleconference from Cordova. In
the past few years, he said, he has been basing his season on
pre-signed contracts with processors, which require accurate
information. These contracts are based on a bonus or added
economic incentive, if a certain level of production and sales are
reached. Under the current COAR, he is having trouble determining
figures to base such a contract on, which is the crux of this
issue. This legislation, he said, would help facilitate
negotiations with processors. He could see that there would be a
little added burden for processors, but for an honest and open
system, this information is necessary, otherwise a fisher has to
take a processor's word. He would prefer that this information is
presented in black and white. Please support this legislation.
Number 2663
DOUGLAS DONEGAN, Vice President, Trident Seafoods Corporation,
testified via teleconference from Anchorage. He is opposed to this
legislation. The requirement, he said, to report by fishery
management area is impossible to comply with. During the season,
fish are routinely transferred from one area to another for
processing. Moreover, even if this was possible, the inventory and
record-keeping requirements would be a considerable expense. He
strongly suspects that this information could actually provide
leverage to drive down prices, which would ultimately lower the
price paid to fishers and reduce revenues to the state. He also
thinks that this information would provide endless opportunities
for misinterpretation, which would increase the level of mistrust
between fishers and processors. In addition, prices are subject to
many variables including the value of the Yen and amount of farmed
salmon on the world market at any one point in time. He said, "We
must recognize that this is just the beginning. If we establish
this precedent, we will eventually be forced to add on all other
species, increasing the cost of this program both to the state and
to the processors." He strongly recommends instead that the annual
COAR be improved. He also finds it very disturbing to expend
additional state funds in an era where state seafood inspections
have almost been eliminated because of budget reductions. Surely,
he said, the arguments for a good seafood inspection program
outweigh the arguments for increased reporting. Thank you.
Number 2557
NICK KOURIS, Bristol Bay Fisher, testified via teleconference from
Anchorage. To be honest, he said, this bill would help him. He is
tired of looking at open fish tickets. In addition, he is worried
about why 95 percent of the processors in Bristol Bay pay almost
the same price. He said, "You know, they say trust us, you know,
but the record never shows up." Thank you. He supports this
legislation.
Number 2503
SUSAN ASPELUND, Executive Director, Cordova District Fishermen
United [CDFU], testified via teleconference from Anchorage. She is
also speaking on behalf of the fishing fleet in Prince William
Sound and Copper River. The CDFU board of directors voted
unanimously to support this legislation. The seafood industry, she
said, is in a constant state of change, and in order to accurately
depict its status regulators, legislators and other policy makers
need to know the economic worth of product, value, production and
inventory. While good information exists, she said, for thermally
processed salmon products due to the Average Wholesale Price
Report, that same level of reporting is needed for fresh, frozen
and roe products. She further noted that fishers pay a 1 percent
assessment for marketing, and a 2 percent aquaculture assessment,
both based on ex-vessel value. The City of Cordova receives
revenues generated by the fisheries business tax also based on
ex-vessel value. This legislation would, therefore, provide
accurate information for every entity dependant upon revenue
streams derived from salmon products. Moreover, the current
information provided in the COAR is neither timely nor verifiable.
It contains inaccuracies due to noncompliance and confidentiality
issues. In addition, the seafood market has become increasing
complex and diverse. She said, "Gone are the days of the
single-product forum and marketplace. Markets are very difficult
to understand and reliable information is difficult to obtain
and/or understand." If this industry is to mature and meet these
challenges, she said, then all involved must work with a clear
understanding of the issues to survive much less succeed. Fishers,
in particular, are poorly equipped to understand the marketplace,
which often creates a divisive attitude between fishers and
processors, at the very time when understanding and cooperation
would improve the ability to respond to these types of challenges.
The basic information provided for in this legislation ought to
enable fishers to make better business decisions based upon facts,
not fiction. CDFU encourages the committee members to support this
legislation.
Number 2327
JACK KEANE, Bristol Bay Fisher, testified via teleconference from
Anchorage. He said,
I was just reflecting on the changes in the marketing
since that time that when I was first in Bristol Bay the
price was largely negotiated between the fishermen and
the packers. And then just about that time the Japanese
market was emerging along with the what we called
'floater' or cash markets at the time that were smaller,
newer processors that are now the giants of our industry.
And we thought we were sort of working together to accept
a grounds-price that might be 80 percent of the ultimate
price and then a 20 percent bump later on. And those
buyers were short of money and the Japanese were
supplying the money and most of you know sort of how that
worked, I think. And then all of a sudden there was a
day when nearly simultaneously all of these now much
larger processors said, 'Well, gee we don't even know
what 80 percent of it's gonna be. I think you guys ought
just go fishing with no price on the ticket.' And ever
since then that's pretty much what we've been doing.
What I call fishing for tips. And then there was a
strike in Bristol Bay in 1990 that all over the state it
seemed to be about price, but I think that two-thirds of
it was about having something on the fish ticket. And
then a legislative law was put in to insist that fish
processors posted the price being sold. Well, it was
never enforced for two years and then after two years it
sort of mysteriously disappeared. So, then for all that
time now we've been at the end of the season giving the
fish companies an amount of fish almost equal to some of
our homes with nothing on the fish ticket. In this last
year when we left the docks we thought we were looking at
$1.30 or somewhere there 'abouts.' When we got back to
the docks, it seemed like it was about maybe a $1.00, but
when we got back home it seemed like maybe it was 80
cents, which is a huge disparity that Icicle brought up
this word 'mistrust' and that's exactly the problem and
why this bill may be up here, is that a mistrust does
exist and while all the processors and fishermen and
legislators are here somehow we need to work together to
get more so that the processors and the fishermen's
issues are more the same. And it seems like the state of
the art of that is the USA contract around most of the
state, except USA, which is based at least on the
wholesale price that the processors get for their fish.
That doesn't put us on the same side of the street
because, I think, most fishermen think that the
processors need to do more innovation, find new markets,
get us out of Japan, but there's not any way for us to
try and do that because once we let go of those fish then
it's pretty well up to them. So, I think that I'm in
support of this 363; that we need this reporting and/or
a substitute would be for the processors to come up with
a way of cooperating that might be opening their books to
a neutral CPA to settle up with the price, to find some
way to work with the fishermen and it seems like we're
all shooting ourselves in the foot here because the
processors are going to antitrust suit and it seems to me
that the seeds for another one are there; that this year
we again sold our fish in Bristol Bay on an open ticket.
The price seems to be, as one other fisherman testified,
you can't flip a penny or two in between one processors
from another by the time you add in the services and this
and that. They all shake out about the same, and Icicle
said, 'Well, gee if you don't like us let's go to the
next one,' which is about like these chairs around this
room here. One's the same as the other. So, I think,
the thrust of this is to try and find some way that that
our fishing industry which seems to me ten years behind
the times can work together to come up and compete in
this globally competitive environment together. So, I
don't know that 363 is the perfect answer to that, but we
need something. That's--that's my suggestions and thank
you very much.
Number 2050
KEVIN ADAMS, Bristol Bay Fisher, testified via teleconference from
Anchorage. Being the single, largest resource and tax base in
Bristol Bay, he said, timely and accurate reporting would be most
helpful for budget projections. Community members need to know if
their jobs would be funded over the winter. A bad fishing season
and job uncertainty, he said, has loaded these communities with a
lot of unnecessary stress. If a processor has sold its pack at the
end of the summer, diligent tax reporting would infuse money to
communities earlier. On the other hand, however, knowing that the
money is not coming would allow a community to search for other
funding. Thank you.
Number 1972
PAT HARDINA, Controller, Cook Inlet Processing Inc., testified via
teleconference from Kenai. In response to the issue of collusion,
she believes that fishers are responsible for processors paying the
same price. She said,
If I pay a nickel more than the processor down the
street, the processor-down-the-street fisherman goes down
there and beats them up for a nickel more. Conversely,
if processor 'X' pays a dime more than me, our fishermen
come into our office and demand a dime prior to going--or
they'll go fish for someone else.
MS. HARDINA further stated it's a little surprising that fishers
think processors are responsible for the prices being the same. As
a controller, she said, she is directly responsible for filing the
COAR, which is very comprehensive and general at the same time.
Most processors in the state do not have adequate computer and
reporting systems that allow for the transmission of this type of
data. She called it a garbage-in, garbage-out process. In
addition, the information is not accurate enough for fishers to
base judgement. She cited that many processors do not track the
sale of their fish by management area. The problem with fresh,
frozen and roe, she said, is that it matters where it came from; it
doesn't matter where canned salmon comes from. Processors average
this information, then the Department of Fish & Game averages it
again, which results in a very general set of data. Another
problem, she said, is that the reporting of different products
could include a skin-on fillet, a skin-off fillet, a pin-bone-off
fillet, a pin-bone-on fillet, an industrial-cut fillet, a
vacuum-packed fillet, and an individually-cooked-frozen fillet.
All of that information would be combined to one line that says
"salmon fillet." Similarly, salmon roe could include many
different types which would also be combined to one line, which
negates any benefits of reporting this type of data individually.
Another problem, she said, is burden. It takes her staff one week
with four people to file the COAR one time per year. Three times
a year would triple that effort. It would almost be impossible for
Cook Inlet Processing to meet the September 30 reporting period
because from May 1 to August 31 they do 50 percent of their annual
production, while salmon processors do 100 percent of their annual
production. Lastly, who will audit this information going to the
state to ensure that the data is valid? Prior to USA attaching
salmon contracts to the COAR, she was never interested in the
results. It was simply filed away. The same is true for the
Wholesale Case Price Report [WCPR]. She's not interested; she is
well aware of the inconsistencies in the data. In summary, she
said, this legislation would require most salmon processors in the
state to spend considerable time and money to report largely
inaccurate data for the purposes of providing invalid information
to fishers and the market, both of which could be used against
processors.
Number 1425
BRUCE SCHACTLER, President, United Salmon Association [USA],
testified via teleconference from Kodiak. He noted that USA is the
organization that sets the contracts and ex-vessel value, which are
based on the COAR. This legislation, he said, calls for a
commodity report. The COAR is very complicated and no one wants to
require that information three times a year, which is why it was
decided to add this to the thermally processed reporting
requirements. In addition, most of the potential problems being
discussed today in regards to confidentiality were discussed when
the reporting requirements for thermally processed salmon were
changed from two to three times per year, and the language was
changed to include pouch products. He also noted that after the
requirement changed the price went up; it didn't go down. Since
then, however, the price has gone down, but he hasn't seen anything
to indicate that the fluctuations are related to the actual report
being put out. In addition, this report asks for first wholesale
price, whereas the COAR asks for processed, which results in
theoretical and manufactured data. It's really just a database,
which is unfortunate because it's the only thing that the
harvesters and public have anything to base their information on.
Furthermore, the COAR is filed in April and it isn't until July,
August or September that it is finalized. He cited that for the
1999 season legislators, fishers and the public will not have any
idea of its value until 2000, which is too late. In conclusion, he
said, there is no way for the Department of Revenue to
cross-reference and audit this type of information. He believes
that this legislation wouldn't move the industry forward, for the
information would be anywhere from three to six months old, which
in this day and age is ancient and worthless to any competitor.
Number 0824
TOM WISCHER, Kodiak Fisher, testified via teleconference from
Kodiak. He is representing himself and the United Fishermen of
Alaska. He thinks that the timely reporting of wholesale fish
prices throughout the year is important to every citizen of the
state. There is a direct relationship, he said, between those
numbers and ex-vessel value, which determines how much goes to the
general fund. As a fisher, he believes, that he is a partner with
processors; he has just as much at stake as they do. In other
words, he can't survive without them and they can't survive without
him. The problem is, he has very little information to base his
business decisions upon. As previous testimony has indicated, the
data is garbage. As a result, it's hard to determine whether he
got a fair price and which fish to target the next season. He
said,
Ideally, I would want to go to a processor as a partner
in the industry and say, 'Okay, you're telling me that
this is the market value of your products and this is
what you're willing to pay me and I'm willing to accept
that and if we're gonna share in this process that at the
end of the season you're gonna justify to me that--that
I got a fair deal and give me numbers from your
operation.' Well, that's not happening, and I don't know
that that has happened successfully anywhere. Ideally,
I think that's the answer, and that gives fishermen the
opportunity to say, 'Well, I don't like your company
because you're not marketing salmon, and you're not
getting a good enough price in the world market, so I'm
gonna go down the street.' But given that that's not a
possibility at this point in time, I think this bill
offers the only compromise that makes sense. And that's
to have a benchmark, a statewide, wholesale average of
the most common product forms that salmon take in the
world market in order for me to base all of my business
decisions upon. And for that reason, I urge support of
that bill. Like I say, I think every citizen in the
state has a stake in knowing what the value of our salmon
pack is, whether it's in the can or whether it's a
fillet. It doesn't really make any difference. Thank
you.
Number 0568
MATT MOIR, Representative, Alaska Pacific Seafoods, testified via
teleconference from Kodiak. When the fishery is at its peak, he
said, everybody is pressed to their limit; a lot of fish changes
hands throughout the state. As a result, it would be nearly
impossible to track products by reporting area. In addition,
tracking by specific product type would be burdensome, as many
testifiers have already indicated. He's not convinced, therefore,
that this legislation would benefit the industry as a whole. His
biggest fear is that the customers would gain leverage, and that
the industry would sacrifice confidentiality. He's against this
legislation, but he's glad to see that the COAR is being revised.
Thank you very much.
Number 0377
BILL LINDOW, Representative, Copper River Salmon Producers
Association, testified via teleconference from Cordova. The
contracts that the association has negotiated with local processors
for Copper River salmon products are based on the COAR. It's very
important, therefore, that the COAR is improved so that their
profit sharing becomes more meaningful and accurate. The
association, he said, wants to be progressive and find ways to work
with processors. This legislation is a good start. He realizes
that this legislation presents problems, but he hopes that it will
bring the parties to the table for a reasonable agreement. Thank
you.
Number 0158
SCOTT McALLISTER, Representative, United Salmon Association, came
before the committee to testify. He has been a charter member of
the association since its inception. He understands that the
relationship between harvesters and processors is one of a long and
rich history, which goes back to territorial days when everything
went into a can and fish were bought by the piece. But as time has
gone on, he said, that relationship has not changed. The heart of
the issue is trust. He said,
We are clearly co-producers of a product here in Alaska,
which is the number one product produced here in Alaska
outside of raw...[TAPE CHANGE]
TAPE 00-04, SIDE A
Number 0001
MR. McALLISTER continued. He said,
... we are taxed 1 percent of our gross earnings as
fishermen goes to marketing. And we work together with
the processors and the wholesale and retail industry to
return ourselves the best possible interest for these
products. Clearly, we cooperate on the grounds to get
our fish out of our gear, over our decks, onto
transportation network that gets fish over the dock and
into the processor's pipeline and then down the road to
service these markets where we're spending our marketing
dollars. When it's all come a time, everything comes
down and is due and payable, there is a strict
proprietary secret that the processors withhold from us,
and that is how much this product was worth until a year
and a half later when they're required to report through
Commercial Operators Annual Report at Alaska Department
of Fish & Game the results. Well, at the end of the year
and then a year and a half after the fishing season we
get the results of the market.
MR. McALLISTER further stated that the relationship between fishers
and processors is dysfunctional. Fishers are asked to be
co-producers and co-sell, yet they don't have any idea of the
value. He doesn't know of any other industry in which people
conduct business under this type of arrangement, especially when
dealing with a public resource. Every citizen of the state, he
said, has a vested interest in the ex-vessel value. It's incumbent
upon the government, therefore, to restore an element of trust. He
would be glad to answer any questions.
Number 0370
REPRESENTATIVE DYSON asked Mr. McAllister whether he could see
another way to solve this problem. A previous suggestion was to
let fishers "see the books" and "share in the risks."
MR. McALLISTER replied he has participated in a shared type of
relationship in the past with black code, halibut and herring, but
the salmon fishery is a different story. He noted that the United
Salmon Association has pursued transparent types of relationships
with processors, but have failed. They instead have ended up in
price actions. He said,
There is so much transparency and there's such a level of
understanding in all the other aspects of our business
that this one missing piece of information is something
that the processors tenaciously hang on to. And
regardless of their--anybody's desire to enter into these
agreements, the closest we have come is the price
contracts we currently have at United Salmon Association
for thermally processed salmon. We have a very good
price index. We have very successfully negotiated
contracts with processors that have an in-season,
ex-vessel price and have a settlement schedule based on
the performance of the wholesale season after the season,
which is based on the reporting of the WPR by processors
to Department of Revenue. It's working now, and I
believe it can work for these other product forms which
we don't have.
Number 0604
REPRESENTATIVE DYSON asked Mr. McAllister whether a transparent
relationship has worked with other kinds of fish.
MR. McALLISTER replied yes. It has worked for herring, cod and
halibut.
REPRESENTATIVE DYSON asked Mr. McAllister, What will it take to
make this happen for the salmon fishery?
MR. McALLISTER replied, it will take a reasonable dialogue with
processors, a wholesale price index upon which to base ex-vessel
value, and the attachment of a fisher to the market value over time
as the product is sold after the season.
REPRESENTATIVE DYSON asked Mr. McAllister whether he believes that
this legislation gets him there or part of the way there.
MR. McALLISTER replied it gets him to the wholesale price index, so
that a price and settlement could be negotiated. The dialogue part
is up to the fishers by region and processor, however, which could
take on a number of different forms.
Number 0858
CO-CHAIRMAN HARRIS closed the meeting to public testimony.
Number 0871
CO-CHAIRMAN MORGAN made a motion to adopt Amendment 1,
1-LS1298\G.1, Utermohle, 2/22/00. It reads as follows:
Page 3, following line 26:
Insert a new bill section to read:
"*Sec. 7. AS 43.80.100(4) is amended to read:
(4) "fish processor" means a person engaging
or attempting to engage in a business for which a license
is required under AS 43.75.010-43.75.055; "fish
processor" does not include a person engaged solely in
secondary processing of salmon products; in this
paragraph, "secondary processing" means additional or
supplemental processing performed on salmon products that
were purchased at wholesale and for which the fisheries
business tax under AS 43.75 was paid by another fisheries
business;"
Renumber the following bill sections accordingly.
REPRESENTATIVE DYSON objected to the motion and asked that it be
explained.
Number 0981
JOANIE WALLER, Staff to Representative Alan Austerman, Alaska State
Legislature, came before the committee to explain the amendment.
Alaska Seafoods International, she said, has expressed concern, as
a secondary processor, that this reporting requirement would affect
them since they are a value-added processor, not a primary
processor.
REPRESENTATIVE DYSON asked Ms. Waller whether removing secondary
processors would affect the value of the COAR, even as amended.
MS. WALLER replied yes. She noted that Alaska Seafoods
International wants to clarify that fish primarily processed have
already been taken into account.
Number 1088
REPRESENTATIVE DYSON indicated that he needs more time to consider
this amendment. He is guessing that this would spark an
interesting discussion on what becomes a secondary process. He is
also guessing that some processors would indicate that their
business includes both primary and secondary processing.
REPRESENTATIVE DYSON withdrew his objection.
CO-CHAIRMAN HARRIS announced that Amendment 1 has been adopted.
Number 1173
CO-CHAIRMAN MORGAN made a motion to adopt Amendment 2,
1-LS1298\G.2, Utermohle, 2/28/00. It reads as follows:
Page 4, lines 11-17:
Delete all material and insert:
"(8) "area of production" means the area in
which a salmon product was produced; in this paragraph,
"area" means one of the following areas:
(A) Southeastern and Yakutat;
(B) Prince William Sound;
(C) Cook Inlet;
(D) Kodiak;
(E) Chignik;
(F) Aleutian Islands, Atka-Amlia
Islands, and Alaska Peninsula;
(G) Bristol Bay; or
(H) Kuskokwim, Yukon-Northern, Norton Sound-Port
Clarence, and Kotzebue."
CO-CHAIRMAN HARRIS objected to the motion and asked that it be
explained.
MS. WALLER deferred to Mr. McAllister of the United Salmon
Association.
MR. McALLISTER explained that Amendment 2 came about as the result
of brief discussions with the Department of Revenue as a
cost-cutting measure to reduce their fiscal note. It consolidates
the Aleutian Island, Atka-Amlia Island and Alaska Peninsula into
one reporting area. It also consolidates the Kuskokwim,
Yukon-Northern, Norton Sound-Port Clarence and Kotzebue into one
reporting area. It also consolidates Southeastern and Yakutat into
one reporting area. The other areas remain the same.
CO-CHAIRMAN HARRIS asked Mr. McAllister whether the intent of the
amendment is to tighten up the districts so that there are less
reporting areas, thereby cutting costs.
MR. McALLISTER replied yes. There would be fewer fields of data to
enter.
CO-CHAIRMAN HARRIS withdrew his objection and announced that
Amendment 2 has been adopted.
Number 1376
CO-CHAIRMAN HARRIS indicated that he doesn't have the votes to move
this legislation out of committee today. He is also disappointed
in that the Department of Fish & Game doesn't have a representative
here to testify. He will hold this bill over for further
consideration.
REPRESENTATIVE DYSON asked that public testimony be allowed when
the committee reconvenes to discusses the amendments further. He
thinks that Amendment 1 will be problematic.
CO-CHAIRMAN HARRIS indicated that he would open public testimony
again when the committee reconvenes.
[HB 363 WAS HELD OVER FOR FURTHER CONSIDERATION]
ADJOURNMENT
There being no further business before the committee, Co-Chairman
Harris adjourned the House Special Committee on Fisheries meeting
at 7:05 p.m.
| Document Name | Date/Time | Subjects |
|---|