An assesment of the De Minimis Exemption in the CFP discarding regulation: for Scottish Fleets

The discard regulation and the de minimis exemption

In order to cater for unwanted catches that cannot be avoided even when all measures for their reduction are applied, certain de minimis exemptions can be established for the fisheries concerned under Article 15(5)(c)t:

"provisions for de minimis exemptions of up to 5% of total annual catches of all species subject to an obligation to land as set out in paragraph 1. The de minimis exemption shall apply in the following situations:

i) where scientific evidence indicates that increases in selectivity are very difficult to achieve; or

ii) to avoid disproportionate costs of handling unwanted catches, for those fishing gears where unwanted catches per fishing gear do not represent more than a certain percentage, to be established in the plan, of total annual catch of that gear.

Catches under this provision shall not be counted against the relevant quotas, however, all such catches shall be fully recorded."

The regulation itself does not provide any guidance on this, but leaves it to the Member States to substantiate the concept. ^[8] It is clear however that economic considerations are invited to justify activity. Several observations regarding the interpretation of the above can be made:

Observation	Comment
Paragraph 3(c) states that the 5% de minimis allowed is measured against "total annual catches of all species". This could be interpreted in a number of ways. .	Quota is managed at the stock level. For example, scientists identify discrete stocks of specific species where the population can be measured and it is on this basis that quota is determined yearly. To maintain stock integrity suggests that proportionality within and across quotas are maintained. If this was not the case then some stocks could be severely impacted. Of course this impact would still be known as there is a responsibility of the exemption to fully record all catches.
Mobile gear ( i.e. nets) are typically used in multi-species fisheries and are most relevant to discards. Gear technology with regard to nets is a highly developed field.	It is clear that advice regarding suitability of different mesh sizes is taken into account when defining minimum mesh sizes. This can be seen in different regulation applied for the main nets and the cod ends, e.g. whitefish to Nephrops to flatfish to pelagic. As a result, if voluntarily an increase in gear from the current regulation is taken then this would mean that increases in selectivity are difficult to achieve.
Disproportionate costs of handling unwanted catches are on the surface difficult to define.	Unwanted catch for fishmeal would likely gain less than market value. Costs proportioned to unwanted catch would be similar to catch landed at market value. Handling of unwanted catches implies that landing would invoke a net cost (including sorting, recording, transporting etc). Measuring the net cost of handling unwanted catches might also include taking account of lost revenue that may result from not being able to make full use of quotas.
The "certain percentage" referred to in the de minimis exemption paragraph requires guidance from fisheries scientists.	Any percentage could be acceptable but given the general aims of the reformed CFP the main objective is likely to be minimisation of discarding per fishing gear where the minimisation is constrained at an agreed and accepted level using current levels of estimated discarding as the basis for setting the level. For example, 5% might be the level in one case but in another it might be 80%. On formulation of the regional management plan, this will likely be agreed for each "unwanted" stock by main gear type. It should be kept in mind that if the discard percentages quoted are generally based on volume caught and not in relation to then the additional mortality placed on the stock through the application of de minimis should be considered in relation o the health of the stock.
Issue (ii) of Paragraph 3(c) states that unwanted catches of stocks applicable to this exemption should not exceed a certain percentage per fishing gear.	This implies that there should be a third qualifying criteria in addition to selectivity and disproportionate costs, where only a fleet catching a de minimis level of the stock should be allowed to access a de minimis exemption. This would indicate that the main management of the regulation should be at the fleet level, where fleet is defined by the dimensions of country, main gear and area fished.

In practice, there are several practical observations regarding the interpretation of the de minimis exemption that can be made. ^[9] Principally, the aim of the exemption should be to keep fleets fishing, acknowledging catch composition in multi-species fisheries. ^[10] The incentive to improve behaviour with regard to maximising selectivity is a bonus that both supports the regulation and fisheries.The number of choices for how to interpret and implement the de minimis exemption is many and varied. However, de minimis is analogous to a safety valve to allow discarding under certain conditions.

The first applicable 'situation' of the de minimis exemption is where "increases in selectivity are very difficult". For many Scottish fleets the minimum mesh-size used by many vessels is specified. Increasing the mesh size beyond the minimum may increase selectivity, but may also result in lower catches of the target species. As the vessel must remain economically viable in order to continue fishing significant reductions in target species associated with an increase in mesh size make improving selectivity very difficult. Of course it is technically possible to improve selectivity to some degree to meet targets, however an assessment of economic viability under those conditions must be considered. Other measures to increase selectivity include spatial and temporal measures, as well as the design of gear ( e.g. escape panels).

The second applicable 'situation' of the de minimis exemption is where there are "disproportionate costs of handling unwanted catches". The statement in this second situation states that this exemption can apply where "unwanted catches per fishing gear do not represent more than a certain percentage". This might imply that only fleets with low levels of unwanted catch of a given species can apply for de minimis exemption. It is unclear what this percentage might be and how the "fishing gear" that makes up the denominator for this percentage is defined. It is left for this to be agreed in the regional management plan. However, if it is interpreted that "a certain percentage" means low then could this be 20% or 50% subject to supporting evidence of catch that cannot be avoided. What does constitute small or large discards where such a percentage is measured on unwanted catch and not on wanted catch or on stock status. It is clear that guidance regarding acceptable levels must be advised by Scientists and agreed by policy makers. It is also clear that the volume of fish discarded versus level of stock biomass is a key consideration in this process. Furthermore, considerations regarding undersized or small fish and unavailable or difficult to catch fish should be taken into account.

With these two situations in mind, the level at which the policy operates must be defined. It is the big picture that matters, as allocation can happen in many ways, i.e. that the 7%-5% de minimis is not exceeded at a national level, but clearly this is built upon the activity of vessels. It can be recognised that there is scope for variability in the percentage allowed by fleet ( e.g. 10% de minimis for one fleet and 1% for another). That is the regional group's responsibility in defining the management plan. However, it is also clear that there is only so much de minimis that can be moved around. ^[11]

This issue relates closely with 'quota flexibility' in the discard regulation which enables the potential movement of mainspecies quota to other species quota. Although this issue is not directly addressed in this study, it is worth noting that as a result the mortality on choke species could be impacted. It is possible that under the new rules, mainspecies quota will not be able to be fully caught as choke species dominate whether the fishery is open and for the better management of the stock regional coordination is advised.

With this in mind, there are twokey issues to confirm:

• What fishing conditions ( i.e. fleet, main gear used and area fished) are species considered applicable for de minimis exemption?
• How the 5% de minimis is allocated to fleets identified as eligible?

In line with scientific assessment and management, de minimis would be most easily aggregated up from the level of single stocks. The stock defines the area so it is therefore the activity of fleets with gear used that are required to be assessed for de minimis exemption.

The economic inference in Paragraph 3(c) regarding disproportionate costs could imply that some benefit might accrue from de minimis catch. It is generally considered that de minimis catch is returned directly to the sea. The benefit comes about through the effect of de minimis allowing more of an unwanted species (5-7%)to be caught enabling more of the allocated quota of main quotaspecies to be realised.

Therefore the cost to the fishermen could be described as the total additional benefit that a vessel obtains from being allowed to discard through de minimis.

Allocation of de minimis

The allocation of de minimis across fleets is difficult.Traditionally quota is allocated based on targeted species only and as de minimis is as applicable to non-target species the relative eligibilityof fleets for de minimis must be judged. Therefore an operational approach that minimises the need to prioritise between fleets is required to ensure a fair deal is obtained.

Practically, the allocation has to be done before and not after the event - e.g. pre-allocated to POs. It is likely therefore that POs would then have direct input into which vessels receive exemption. It is worth noting that gaming issues are thought to be minimal if guidelines can be clearly specified. Alternately, de minimis allocations could be managed centrally by Marine Scotland if it was felt this would enable more effective use of the facility.

It is worth noting that with the implementation of the discard regulation, leasing costs will be in flux as the market for quota will diversify from those who target species to make a living to include those who predominantly target other species so that they can maximise the benefits of allocated quota. As a result, it's likely that in the early stages of the regulation quota will be held resulting in decreased liquidity with consequent upward pressure on prices.

If quota is exceeded then the same action as now is most likely, from bottom up:

• If vessel exceeds quota then it answers to the PO
• If PO exceeds quota then it answers to the UK
• If UK exceeds quota then it answers to the EC
• If over quota is less than 5% then straight reduction next year
• If over quota is >5% then 1.1*quota next year

Regulation and economics

The implementation of disproportionate costs within a policy framework is a new approach. The only other policy area that has initiated such an approach is the water framework directive ( WFD) where some aspects of disproportionate costs are incorporated to improve the behaviour of actors with regard to the policy. It follows the same idea of accepting (in cases that are disproportionately costly) the complexity of achieving the environmental objectives and allowing some small degree of flexibility as a result. Of course such flexibility is subject to conditions of fairness and appropriateness ( e.g. they cannot make the situation knowingly worse), but ultimately direct activity to the aims of the policy. In a new approach for policy, economic considerations can not only be used to evaluate this trade-off but are required.

The typical approach in economic analysis for assessing an issue like unwanted catch is:

• to establish inclusion criteria, allowing for an assessment of whether a vessel/fleet is immediately eligible to apply for de minimis; and/or
• to undertake economic impact assessment for groups of similarly operating vessels at fleet (or sub-fleet) and area level.

It is the first step that defines a practical and operational approach to identify the species/stocks that vessels that can apply for de minimis. The second step helps to understand the impact of the proposed approach on a fleet. An approximation to this could be to use an assessment of revenue achieved (or estimated) Vs break even revenue taking into account the minimum income that a vessel must obtain to covers all costs resulting in zero profit. ^[12]

The criteria for inclusion are expanded upon in Figure 1 and includes non-economic criteria as well as economic criteria. It should be noted that an operational implementation should follow rules specified in step 1 which would allow the identification of vessels/fleets and associated species eligible for de minimis. The disproportionality of costs would be a natural consequence of these criteria being fulfilled.

Figure 1. Inclusion criteria for de minimis (fishing gear, species and area)

*Availability of quota for purchase in this context is an operational decision and is not included here as a criteria as it cannot be pre-assessed.