Not surprisingly transshipment is one of my favorite topics, and this week a new report commissioned by PEW and researched by MRAG was released to coincide with the WCPFC taking place in Port Moresby

The report (as most of the work MRAG does) is very thorough and a good insight into the key businesses and processes driving transshipment and whether the current rules and monitoring requirements are effective in achieving the conservation and management objectives of WCPFC fisheries.

Obviously I’m too small of a fish to be visible on their radar because I don’t figure at all even if I been working and writing substantially over the years… I have a long way to go to reach the consultant’s upper leagues!

The only slight criticism I would have made the lack of more substantial separation of transhipment in port from transhipment at sea (a totally different beast), particularly when it comes to excuses of the longlining countries in opposing transshipment in port due to “Pacific ports being unfit for transshipment” due to excuses like lack of ULT (Ultra Low Temp -50C or -35C for sashimi) freezing capacity, or lack of an EU authorized Competent Authority… these are totally inappropriate excuses because of the miss the basic point that if the fish touches the land…. then it is landing… not transshipment!

Transshipment occurs in between two vessels ed of story… no need to have shore-based facilities or sanitary authorities. In terms of having an EU authorized country, then containerization onshore would be an issue but nor for transhipping… that is such a basic issue that I already criticized in this other report.

I don't think enough differentiation and alignment were made in between transshipping defined as “vessel to vessel” and “landing and containerization”, this latest practice while sometimes referred to as transshipment, but is not. Furthermore, as soon as the fish leaves the boat and is landed (even if in a custom bonded wharf) all sorts of market access and trade implications arise.

If anything (from my experience) if you want to transship ULT fish in between vessels, is much easier (and more importantly safer) to do it in the protected water of a port, rather in the high seas where you are way more exposed to weather events and rain (at -50C freshwater drops causes marks on the fish skin affecting value).

The other issue how little they explore on why vessels go to a port or to another to tranship and the role that masters, vessels managers, and just the trip characteristics have on this process (so I will write about this on my next blog)

In the meantime, I quote the executive summary only… but read the original… It is really worth reading if you have an interest in transshipment.

BACKGROUND AND OBJECTIVES

The Western and Central Pacific Fisheries Convention defines transhipment as “the unloading of all or any of the fish onboard a fishing vessel to another fishing vessel either at sea or in port.” In recent years, around 80% of purse seine product and 22% of longline product harvested in the Western and Central Pacific Fisheries Convention Area (WCPF-CA) has been transhipped on or near the fishing grounds (SPC data; WCPFC, 2018a).

While the practice of transhipment is a longstanding part of the WCPO fisheries landscape, relatively little is known about the ‘business’ of transhipment outside of the main players involved. This includes the key companies involved at all stages, the main factors influencing profitability, the extent of vertical integration and the economic impacts of transhipment regulation. Against that background, the Pew Charitable Trusts commissioned MRAG Asia Pacific to undertake a study of the ‘business ecosystem’ of transhipment in the WCPO. The main aims of the study were to provide an overview of the key businesses and processes involved in transhipment and the extent to which existing monitoring and regulatory arrangements are effective in achieving shared fisheries objectives.

Information to support the study was drawn from four main sources – (i) interviews with key stakeholders in the transhipment business (e.g. fishing companies, tuna trading companies, carrier operators, Pacific island businesses, regional secretariats), (ii) corporate database searches, (iii) the Global Fishing Watch website, which uses Automatic Identification System (AIS) data to track the movement of fishing vessels and (iv) other publicly available information (e.g. WCPFC Record of Fishing Vessels’; WCPFC member Annual Part 1 reports, etc).

HISTORY OF TRANSHIPMENT

The history of transhipment in WCPO tuna fisheries has not been well-documented to date but is believed to have commenced with catch consolidation amongst longliners on a rotational basis. At the industrial scale, most interviewees recalled that transhipment in the WCPO commenced in the mid-1980s. The rapid adoption of transhipment was influenced by the very high value of tuna in the 1980s, at the peak of the Japanese economy. For fishing companies, transhipment was a way of allowing fishing vessels to remain on fishing grounds to maximise profits in a bull market, while for trading companies transhipment was an efficient way of securing supply, and ideally beating the competition to fish at the source.

At the global level, the conventional reefer carrier fleet is both aging and contracting. Since 1980, around 774 conventional reefer ships have been built, of which 527 remain in service (Dynamar, 2018). Most vessels currently in service were built between 1988 and 1994, with very few new conventional reefers built since 2000. Of the vessels built between 1980 and 1990, close to half have been scrapped. The average age of scrapped vessels in recent years has been between 30-42.

In recent years, a key impact on the conventional reefer vessel market has been the rise in the use of reefer containers. Advances in technology and reduced freight costs compared to conventional reefers has seen the container sector increase its market share in the total seaborne trade of refrigerated foods from 50% in 2000 to 82% in 2017 (Dynamar, 2018).

CURRENT TRANSHIPMENT DYNAMICS

As of March 2019, there were 418 ‘fish carrier’ vessels authorised under the WCPFC Record of Fishing Vessels (‘the RFV’). Panama has the largest fleet of flagged carriers with 123 vessels, followed by the Philippines with 111 and Japan with 85.

Carrier fleets

Other key flag states include Korea (31 vessels), Liberia (21), Taiwan (16) and China (12). Seven other flag States have 19 registered vessels between them.

The average age of all registered carriers is 25 years. Over half the current fleet (52%) were built between 1980 and 1995, with only 17% of carriers built since 2010. Amongst the main flag States, China’s fleet is the newest with an average age of 2004 while Taiwan and Thailand have the oldest fleets, with an average year of build at 1978 and 1980 respectively. Of the main flag State carrier fleets, China, Liberia, Panama and Taiwan have the highest rates of high seas transhipment authorisation.

Of the 232 carriers on the RFV >1,000 GT in March 2019, we estimated 137 were active in transhipping fish from the WCPO in 2017-18. Of these, over half (75, 55%) were flagged to Panama. Of the remaining fleets, Korea had the next highest number of active vessels with 27 (20%) (owned by only 7 companies), followed by the Philippines (14 vessels, 10%) and China (9 vessels, 7%).

The average age of active carriers is 27-28 years. Around 65% of active vessels were built in 1991 or before, meaning the many are approaching the age when owners would consider scrapping them (Dynamar, 2018). Only around 12% of active vessels were built in 2000 or later.

Ownership and operational control arrangements for carriers involved in tuna transhipment in the WCPO are dynamic and varied, but can broadly be categorised into three main types:

Charterer model – Under this model a chartering company leases a carrier vessel, owned and crewed by an independent owner. Two basic modes of charter are available – a time charter, under which the charterer leases the carrier for a defined period of time (e.g. one year) and a voyage/space (or ‘spot’) charter, under which the charterer ‘buys’ space on a carrier for a voyage at a time. The chartering model is the one favoured by each of the three main purse seine tuna traders in the WCPO (FCF, Tri Marine, Itochu) and is perhaps the most common operational model;
Integrated fishing-carrier companies - a number of fishing companies own and operate their own carriers as part of an integrated supply chain. These companies tend to be larger, with a sufficient critical mass of catching vessels to justify their own carrier. Many also have interests in post-harvest processing facilities and use carriers as component of an integrated supply chain. Many of the newer carriers commissioned in the past decade have been commissioned by integrated fishing-carrier companies; and
Logistics service provider - these companies tend to have no interest in fishing vessels – they’ve come into the tuna transhipment business from the ‘shipping end’, not the ‘fishing end’. Their main interest is in providing a commercial service to transport fish from the fishing grounds to processing facilities or to market.

The ownership and registration arrangements for carrier vessels are often deliberately opaque. Over time, there has been an increasing movement towards registering reefer carriers with flag States operating open registries, or so called ‘flag of convenience’ (FOC) states. Of the 232 carriers >1000GT on the RFV, 147 (63%) are registered to FOC States. Interviewees noted that the key factors driving the trend towards FOC states were favourable tax arrangements, discretion around company ownership and low compliance costs. In recent years, the presence of an approved EU Competent Authority (CA) has also emerged as an important consideration in the choice of flag State.

Purse seine transhipment

"In 2017, around 1,306 transhipments were reported in the WCPO purse seine sector, accounting for 952,151t of product (~ 79% of total purse seine catch). Although a total of 33 ports hosted transhipments in the period 2015-2017, activity was highly concentrated around a number of key ports, mainly in the central Pacific. Majuro was the key transhipment port, accounting for around 37% of all reported transhipments, while Pohnpei and Funafuti accounted for 16%, and 12% respectively. Our estimates indicate that somewhere in the order of 110-120 carriers (>1,000GT) were involved in purse seine transhipments in 2017/18.

The main considerations involved in coordinating carrier fleets servicing the purse seine sector are described, together with a ‘typical transhipment’. The key companies involved in purse seine transhipment in the WCPO in recent years are summarised including the main tuna traders, integrated harvester/carrier companies""and standalone carrier operators."

Longline transhipment

The factors affecting the profitability of a carrier trip were broadly the same across both longline and purse seine sectors, as well as between operators. The overwhelmingly dominant driver of profitability across both sectors was the time taken to fill up and unload. Time can be lost at the fishing end - e.g. if another trader beats you to the fish, or the fishing slows down – or the unloading end – e.g. if offloading is slow and the trader has to bear the cost of demurrage. To that end, carrier operators/charterers (e.g. tuna traders, logistics service providers) work in very close cooperation with prospective fishing vessels in the planning of trips and must make careful judgements about whether sending a carrier is economically justified.

In 2017, around 1,306 transhipments were reported in the WCPO purse seine sector, accounting for 952,151t of product (~ 79% of total purse seine catch). Although a total of 33 ports hosted transhipments in the period 2015-2017, activity was highly concentrated around a number of key ports, mainly in the central Pacific. Majuro was the key transhipment port, accounting for around 37% of all reported transhipments, while Pohnpei and Funafuti accounted for 16%, and 12% respectively. Our estimates indicate that somewhere in the order of 110-120 carriers (>1,000GT) were involved in purse seine transhipments in 2017/18.

In the longline sector, the key fleets involved in transhipment in the WCPO are the distant water bigeye/yellowfin and albacore fleets operating on the high seas. As at March, 2019, there were 2581 longline vessels on the RFV. Of these, 2,050 (79%) were authorised by their flag State to tranship on the high seas under CMM 09-06. Of the 18 States which flag longline vessels in the WCPO, only six authorise their vessels to tranship on the high seas: China, Japan, Korea, Taiwan, USA and Vanuatu. Collectively, the Taiwanese, Chinese and Japanese fleets account for 83% of all high seas authorised longliners.

In 2017, the Taiwanese longline fleet accounted for around half of all high seas transhipments. China accounted for the next highest number (25%), with the Japanese fleet accounting for less than 2% of all reported events. The nature and operation of the main longline fleets involved in high seas transhipment in the WCPO are described.

The number of reported high seas longline transhipment events has increased by around 60% between 2011 and 2017 (at least some of which may be the result of better reporting). Much of the increase has come from the Taiwanese fleet (an almost four-fold increase in reported transhipment events between 2013 and 2017), with increases also evident in the Chinese, Vanuatu and Korean fleets.

In 2017, around 22% of the total estimated WCPFC-CA longline catch of the three key target species (BET/YFT/ALB) were transhipped on the high seas according to transhipment declarations received by the WCPFC. Bigeye recorded the highest proportion, at 42.2% of total catch, with albacore and yellowfin 18.9%, with at 11.6% respectively. The majority of reported high seas transhipments occur in tropical areas (20oN – 20oS) between 170oW and 120oW.

The number of carrier vessels receiving longline transhipments remained relatively stable between 18 and 27 during the 2011 – 2017 period, although the composition of flag States changed considerably.

Longline companies indicated there are substantial efficiencies associated with transhipment at sea, in particular reduced fuel costs and avoiding loss of fishing time associated with streaming to port. This was particularly the case for small vessels who have limited fish and fuel holding capacity and would spend proportionally more time steaming. Other benefits included cheaper bunkering and provisions, no licensing and port fees and less administrative paperwork and agent’s fees. Several large vessel owners advised that transhipment at sea was central to the operation being viable. Many longline companies told us they actively avoided transhipping in Pacific Island ports because of the higher level of compliance scrutiny involved.

The key companies involved in high seas longline transhipments in the WCPO are described, together with the dynamics of carrier fleet organisation.

POLITICAL AND ECONOMIC LANDSCAPE

Broadly, the membership of the WCPFC can be split into three groups based on the extent to which they participate in, and ultimately support, high seas transhipment:

‘supporters’ of high seas transhipment - these countries, most notably DWFNs Taiwan, China and Korea, have fleets who rely heavily on high seas transhipment as part of their operational and economic model. Broadly these countries are strongly supportive of maintaining ‘properly regulated’ high seas transhipment;
‘opponents’ of high seas transhipment - these countries, most notably the FFA/PNA member countries, have no involvement in high seas transhipment (other than Vanuatu flagged vessels) and strongly support transhipment reform. Broadly, the basis for their position is three-fold: (i) they are concerned that weakly regulated and monitored high seas transhipment represents a significant weakness in the MCS arrangements for shared stocks in the region, (ii) they see transhipment at sea rather than in adjacent PIC ports as a lost opportunity to deliver economic benefits to PIC communities; and (iii) related to (i), they see high seas transhipment as a missed opportunity to undertake comprehensive (and cost effective) compliance checks on vessels in port; and
The ‘others’ – these countries have a range of nuanced positions which don’t fit neatly into either group above.

Our discussions indicated that the response to any ban on high seas transhipments in the WCPO would be complex and difficult to predict with any certainty.

Taiwanese and Korean fishing companies indicated their vessels would return to east Asian ports (either their homeport, or Japanese/Korean market ports) rather than unload in PIC ports on the basis that (i) east Asian ports offer a range of services (e.g. cheap provisions/bunkering, technicians, etc) unable to be provided by PIC ports, (ii) freight costs would be saved by delivering fish direct and (iii) vessels would avoid the higher costs and stronger compliance regimes operating in PIC ports. Companies

were of the view that while ‘many’ operators would go out of business, smaller boats would be hardest hit given limited economies of scale and a higher proportion of steaming to fishing time. One operational response may be a contraction in fishing effort away from the more distant fishing grounds in the central and eastern Pacific towards more westerly grounds, closer to east Asian ports.

Some fishing base operators in PICs thought that a ban on high seas transhipment may mean many current high seas vessels would begin to make partnerships with companies like them who knew the ‘local scene’. One consequence then may be increased requests to reflag vessels to PICs, or alternatively register charters.

For vessels able to survive the shorter-term economic impacts, many longline companies thought there would be a longer-term market and operational correction– fewer fish being caught means higher catch rates over the longer term, as well as higher prices for fish, so those able to stay in the game may receive some longer term benefits. To that end, the impacts of a ban would be dependent on each individual operation’s capacity to adapt to the new environment. Longline companies also indicated that if PICs had better container services they would consider unloading in port, but to make in port landing attractive they would also need better support services – food, bait, fuel, etc.

At the carrier company end, all operators thought that a high seas transhipment ban would increase costs. In addition to a requirement to pay PIC license fees, carrier operators made the point that in the longline sector carrier companies are dealing with much smaller volumes than purse seine, making it operationally harder to coordinate a full load (even harder if the number of longline vessels reduces).

If a high seas transhipment ban saw a proportion of the longline fleet go out of business with many of those remaining choosing to offload direct to east Asian ports, there would likely be a contraction in the carrier market. The impacts are likely to be hardest felt by those operators who own, rather than lease, carriers given the capital involved. A contraction in demand may precipitate the scrapping of some carriers nearing the end of their productive life.

CURRENT MANAGEMENT AND MONITORING

The main instrument regulating transhipment (at least on the high seas) in the WCPFC-CA is the Conservation and Management Measure on the Regulation of Transhipment (CMM 09-06). Despite isolated successes, any clear-eyed assessment is likely to conclude the CMM has not achieved its objectives. Contrary to the intention to allow at sea transhipment only in limited circumstances, the number of vessels authorised to tranship on the high seas is almost double those that aren’t (2,355 Vs 1,229 as at April, 2019), the number of reported high seas transhipments in 2017 was more than twice that in 2012 (with the number of offloading vessels increasing by 90% over the same period, albeit at least some of this may be an artefact of better reporting), and the quality of information available to the Commission to independently verify reported catches remains very limited.

There is no doubt a range of reasons why implementation has not matched expectations, but three arguably stand out:

Weak implementation of the observer program - although intended by CMM 09-06 to be a primary tool to verify compliance, the high seas observer program appears to be largely ineffective at the moment. There is limited use of standardised forms or manuals and only a fraction of data collected by observers has made its way to the WCPFC to date. Crucially, the absence of observer information on catch volumes and species composition limits capacity to independently verify information submitted in transhipment declarations.
No agreement around guidelines for ‘impracticability’ - A key component of the CMM is a prohibition on vessels from transhipping on the high seas unless “it is impracticable for certain vessels … to operate without being able to tranship on the high seas…” Despite a number of attempts, no guidelines have yet been agreed around ‘impracticability’. In the absence of such guidelines, the CMM requires CCMs to apply interim guidelines, namely that a ban on at sea transhipment would cause significant economic hardship and the vessel would have to make ‘significant and substantial changes to its historical mode of operation…’. The fact that CCMs have paid limited attention to these interim guidelines is evidenced by the fact that more than 470 vessels on the RFV currently authorised to tranship on the high seas were built in 2010 or later – and therefore could not have had to make changes to their ‘historical mode of operation’. Moreover, the fact that five of the six CCMs who authorise their longliners to tranship on the high seas authorise >98% of vessels indicates that authorisation is being applied as the ‘default’ position, rather than after some ‘meaningful’ analysis of impracticability.
No serious attempt to encourage vessels to tranship in port - In the spirit of encouraging vessels to tranship in port, paragraph 35 (v) of the CMM requires CCMs of both offloading and receiving vessels involved in high seas transhipment to “submit to the Commission a plan detailing what steps it is taking to encourage transhipment to occur in port in the future”. To the best of our knowledge, no CCM has submitted a plan.

ANALYSIS AND RECOMMENDATIONS

There is little doubt that high seas transhipment faces challenges. Weakly monitored high seas transhipments have long been linked to laundering of illegal catches and broader IUU activities (e.g. Gianni and Simpson, 2004), while in more recent years serious concerns have been expressed around the capacity of at-sea transhipment to facilitate human trafficking, forced labour and other human rights abuses (e.g. ILO, 2013). These problems have led to increasing calls both globally (e.g. Ewell et al, 2017) and regionally (e.g. by the PNA) for ban on high seas transhipment.

For Pacific Island countries, their interest in high sea transhipment reform is strong and legitimate. Despite agreeing the WCPF Convention in 2004, which requires CCMs to encourage transhipment in port, and despite CMM 09-06 reinforcing the intent of the Convention, PICs have seen little practical progress from DWFNs to encourage transhipment in port. At the other end of the spectrum, DWFN fishing companies see high seas transhipment as a legitimate and globally widespread practice which generates efficiencies and forms an essential component of their operation. Subject to an effective management and monitoring regime, there should be nothing wrong, they argue, with businesses seeking the most efficient means to carry out their legitimate operations.

It is these polarised positions which set the scene for the upcoming review of the transhipment CMM. While on the surface there appears little common ground to be found, it is not inconceivable that both positions can be satisfied, at least to some extent. Getting to this future will require a range of reforms and investments, including:

CCMs should comply with the spirit of the WCPFC Convention to encourage transhipment in port.
Two main measures are required to demonstrate compliance with the intent of the Convention:

Those members who’s fleets currently tranship on the high seas should be required to submit tangible plans detailing the steps they will take to encourage their vessels to tranship in port.
WCPFC members should agree the circumstances under which it is impractical for a vessel to tranship in port.

Any vessel for which it is deemed impractical to tranship in port must be subject to a compliance regime that gives confidence that all transhipment activity is tightly controlled.
Key measures of an enhanced monitoring regime for high seas transhipments include:

3. Monitoring on all offloading vessels (e.g. longliners) (electronic monitoring or observers)

4. Examining the utility of EM on receiving vessels (e.g. carriers)

Measures to independently verify transhipment activity should be strengthened
A range of measures to strengthen capacity to independently verify transhipment reporting would be beneficial:

5. All CCMs which authorise vessels to tranship on the high seas should submit evidence of the processes andmechanisms they use to verify transhipment information submitted by their vessels.

6. Arrangements for the implementation of the transhipment observer program should be strengthened.

7. The Secretariat should consider additional measures to independently validate transhipment activity (e.g. inclusion of AIS data in transhipment analysis)

In addition to these core recommendations, observations are made around ensuring equivalent monitoring of fish transported via refrigerated containers and enhancing the attractiveness of PIC ports for longline unloading/transhipment. Observations are also made to improve the utility of carrier vessel information on the RFV.

Francisco Blaha

Independent Fisheries Adviser

Transshipment Again and Again on the WCPFC meeting agenda /December 7, 2019 by Francisco Blaha

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