Consultation on the Recommendations from the Scottish Licensing Review Working Group

Chapter 3: Proposals for Implementation

3.1 Capacity Penalties

3.1.1 Capacity penalties were originally introduced to reduce the overall UK fleet capacity and ultimately fishing effort, to ensure that we were within the ceiling set by the European Commission for the UK.

3.1.2 Currently, a capacity penalty of 5% is paid on both the kilowatts and tonnage, in transactions involving the aggregation of two or more full licence entitlements ( AFL7). When elements of kilowatts and/or tonnage from disaggregated licence entitlements ( ALF19) are used to license a vessel by either single licence transfer or by aggregation, then a capacity penalty of 10% is payable on those elements. For licence transactions involving the use of both full and disaggregated entitlements, a capacity penalty rate of 5% is applied against both the kilowatts and tonnage of the full entitlement and a capacity penalty rate of 10% is applied against the elements of kilowatts and/or tonnage from the disaggregated entitlement(s).

3.1.3 The industry representatives of the SLRWG feel that capacity penalties are now a business constraint which adds unnecessary cost and they would like to see capacity penalties removed. Marine Scotland agrees that with the current process there are unintended costs to businesses. However, this feature does have a genuine deliverable benefit in that it allows the close monitoring of fleet capacity headroom which in turn could be re-allocated to assist initiatives in support of the fleet. The position will be reviewed continuously by Marine Scotland who will retain the option of re-introducing capacity penalties if a future need is demonstrated.

3.1.4 The tables below, extracted from the UK Fleet Capacity Report 2012, suggest that there is currently potential headroom between the UK fleet ceiling and the fleet level on tonnage and engine power which might be accessed to issue new licences - see Section 3.7 New Entrants for further information on this proposal. Please note that any headroom must be calculated taking into account both active and inactive entitlements.

UK Fleet Capacity Report 2012

Question 1

Do you agree that capacity penalties on licence aggregations bring unnecessary costs to industry and should therefore be removed?

3.2 Licence categories

3.2.1 There are currently two distinct fleet bands for licensing purposes:

a) vessels over 10 metres overall length; and

b) vessels of 10 metres and under overall length.

Within the higher length band there are three licence categories which apply:

• Category A (including all Pelagic): stocks which are at greatest risk and are subject to quotas
• Category B: stocks which are generally at less risk than Category A stocks, but are still subject to quotas
• Category C: stocks which are not considered to be at an immediate risk and are generally not subject to quotas.

For vessels in the lower length band, all vessels receive a Category A licence.

3.2.2 The SLRWG was unanimous that a clear division needs to be maintained between the '10 metre and Under' and 'Over 10 metre'. The impending landing obligation means that no TAC (Total Allowable Catch) & Quota species will be permitted to be returned to the sea once caught. The current licence categories determine which species a fisherman is allowed to catch.

Under a landing obligation, fishers would not be permitted to discard unauthorised or unwanted catches currently determined by their licence category. Therefore, we propose to introduce one '10m and Under' licence and only one generic 'Over 10m licence', thus introducing a more streamlined and fit for purpose licensing structure which also offers greater flexibility to meet the needs of fishers. The new two licence structure would mean that pelagic licences would no longer be separate but would instead be converted into an 'Over 10m' licence. The Scottish Government would monitor this change to ensure that no individual anomalies occur and that other UKFAs ( UK Fisheries Administrations) have a clear understanding of this new system.

3.2.3 Where current licences hold additional entitlements (for example a shellfish entitlement) these would be carried forward onto the new licence. It is worth noting that because shellfish and scallops are not TAC and Quota species they are not subject to the landing obligation. Where a licence is transferred or aggregated within Scotland we propose to continue with the 'lowest common denominator' rule. For example, if a licence with a shellfish entitlement is aggregated with a licence which does not have a shellfish entitlement, the resulting licence will not have a shellfish entitlement attached.

Question 2

A) In light of the forthcoming landing obligation, do you agree there is a need to change the current licensing structure?

B) Do you agree with a proposal to have only one 10m & Under licence and one Over 10m licence?

C) Do you agree that the lowest common denominator should apply when transferring or aggregating a licence within Scotland?

3.3 Mis-matches

3.3.1 There may be cases where it proves difficult to find an exact match in transactions to license a new vessel and to allow for this minor mis-matches (additional kW or tonnage given) in licensing transactions were introduced in November 1999. To assist in the transfer of licences, minor mis-matches of up to:

Vessel Group	Tonnes	kW
10 metres & under	1	5
Over 10 metres	2	10

are accepted in licence transfer transactions. However application of a mis-match is subject to the following:

• After the capacity penalty is applied against both tonnage and kW, at least one of the parameters (tonnage or engine power) must be fully met by the donor entitlement(s).

3.3.2 Prior to relaxed dis-aggregation arrangements in January 2009, dis-aggregated licences ( AFL19s) could only be used in single licence transfers. However, under the new arrangements the use of elements from dis-aggregated licences in transactions to 'top-up' the tonnage and/or kilowatts of a vessel was allowed which became subject to a certain amount of regular abuse.

For example

In an extreme recent case, a relatively small 10m & under licence was acquired by a Scottish owner and then split into 14 shares. That owner then proceeded to place 12 of those shares repeatedly onto one of his vessels, making full use of the 5 kW mismatch on each occasion. Eleven of the licences were then removed at each stage creating 11 new AFL7s with the last share staying on the vessel. Another share was placed on another of this owner's vessels, this time taking advantage of the 1 tonne mismatch allowance.

3.3.3 These actions have involved an inordinate amount of time and effort, by both HQ and Fishery Office staff, and this is clearly not what the mis-match provisions were designed for.

3.3.4 If capacity penalties are removed from all licence transactions (see Question 1), offering increased flexibility to licence a vessel, then it should be possible for owners to licence their vessels, acquiring exactly whatever tonnage and/or kilowatts they require from a dis-aggregated licence entitlement(s) ( AFL19s), without recourse to the mismatch provisions. Therefore, Marine Scotland proposes to remove the mis-match provisions on transactions involving the use of dis-aggregated entitlements.

3.3.5 However, for transactions not involving the use of dis-aggregated entitlements, it may still be the case that it proves difficult to find an exact match from available entitlements. Instead of using the mis-match in the licence calculation, Marine Scotland proposes to allow a fishing vessel licence to be short of either tonnage or kilowatts up to the amount detailed below:

Vessel Group	Tonnes	kW
10 metres and under	0.5	5
Over 10 metres	2	10

For example: an over 10m vessel is 40 tonnes and 180 kilowatts and the owner can only source a licence that is for 40 tonnes but 174 kilowatts. Marine Scotland would allow this licence to be used as it is within the 10kW limit, and the figure printed on the fishing vessel licence would be 174.

Question 3

A) Do you agree to the removal of the mis-match provisions on transactions involving the use of dis-aggregated entitlements?

B) Do you agree to the change in the way mis-match provisions will be recorded on the licence?

3.4 The validity period for unattached licence entitlements (shelf life)

3.4.1 Currently licence entitlements which are unattached to vessels are valid for a period of up to five years before they expire. The SLRWG has proposed that the validity period for unattached licence entitlements should be removed, for over 10m vessels, for both economic and business planning purposes, but that the current validity period of five years be retained for 10m and under vessels.

3.4.2 The Scottish Government's view is that the current process has been helpful in allowing us to measure what is happening in the industry with vessels' activities. However, the Scottish Government is prepared to consider extending the five year shelf life restriction for both vessel groups to 10 years, as it is logical from both an economic and business planning point of view.

Question 4

Do you believe the entitlement validity period should be extended to a 10 year period?

3.5 Scallop and Shellfish licensing entitlements

3.5.1 The SLRWG has considered the issue of latent capacity and latent entitlements for both the scallop and shellfish sectors. The Industry representatives expressed concerns over both sectors. In particular, the Industry feel that opportunities in the scallop sector are seriously diminishing.

3.5.2 The Scottish Government's view is that subsequent analysis of the figures clearly does not support the perceived concern surrounding latent entitlement or capacity within the shellfish sector. However, the latent capacity of the scallop sector, on review, has proven to be justifiably different, both from an economic perspective and in relation to the actual use of entitlements. As of 31 ^st December 2012 there were 153 active vessels with scallop entitlements ^[1] in the Scottish fleet. Of those 153 active vessels, 46 had never used their entitlement in any of the years between 2003 and 2012 and of the 107 who had used that entitlement to fish for scallops just 97 did so by means of mechanical dredge. Only 44 vessels had used that entitlement in all the years in that 10 year period and just six of these vessels fished in 2012.

3.5.3 Management of scallop entitlements has been problematic with industry expressing concerns that opportunities in the scallop sector are seriously diminishing. One option under consideration to tackle the problem of latent capacity is to permanently remove the scallop entitlement from any vessel that has never used it within the last seven year period. An appropriate period of notice (6 months) before removal of the scallop entitlement would be given to the vessel owner to allow for activation of the entitlement, should the vessel owner choose to do so, to preserve the status of the vessel's scallop entitlement and avoid the permanent removal of that entitlement. By "activation" we mean that within the six-month period the vessel owner could have the vessel inspected by Marine Scotland in order to prove that it is rigged and operational within the Scallop fishery.

3.5.4 The Scottish Government believes it is appropriate to remove latent entitlements that have not been used in the last seven years. Discussions took place with the SLRWG to establish the mechanisms to deliver this. The previous qualifying criteria were: owners of vessels over 10 metres in length able to demonstrate that they held licences or licence entitlements with a history of having caught a minimum of one tonne of scallops using mechanical dredging gear in any calendar year during the period 1 ^st January 1994 to 31 ^st May 1998, or those who could demonstrate an enforceable financial commitment to introduce a vessel for scallop fishing, were eligible to apply under the new arrangements and have licences allocated.

3.5.5 However, to provide maximum confidence in landings data to be used in the issuing of scallop entitlements we propose to apply the following qualifying criteria:

3.5.6 If a vessel has landed scallops at any point within the last seven years (since the introduction of The Registration of Fishsellers and Buyers and Designated Auction Sites (Scotland) Regulations in 2005) they will retain their scallop entitlement. Those who have not landed scallops within the seven year period will be given six months to activate it their entitlement. The recipient vessel must be rigged and operational, or the entitlement will be removed. It should be noted that Marine Scotland is committed to reviewing and releasing additional scallop entitlements in the future should such action be required.

Question 5

Do you agree with the Scottish Government's proposal for the removal of scallop entitlements that have not been used within the last seven years i.e. entitlements that have not been placed on board a vessel that is rigged and operational within the fishery?

3.6 ELECTROFISHING OF RAZORFISH

Background

3.6.1. Increasingly over the last 18 months or so Marine Scotland, the police and local MSPs have received complaints from fishermen and other interested parties concerned about the effect electro fishing may have on stocks of razor fish and the wider marine ecosystem around the Scottish coast.

3.6.2. Whilst it is not illegal in itself to fish or dive for razor clams, electrofishing is the illegal practice involving passing an electric current into the seabed. Some vessel operators have been using the technique, banned by the EU since 1998, to gather significant quantities of razor clams worth several thousand's at current market prices in a single fishing trip.

3.6.3. The boats involved in this fishery have generators on board which produce electric currents to stun the clams into emerging from the seabed. They are then loaded into sacks and hoisted into the boats to land and sell. All sales must be recorded through the Registered Buyers and Sellers Scheme administered by Marine Scotland.

3.6.4. Reports of the harvesting of razor fish using electricity are very much of interest to Marine Scotland. This form of fishing is currently illegal and Marine Scotland continues to deploy Marine Protection Vessels ( MPVs), working closely with the local Fishery Offices, to specifically target potential electro-fishing vessels in Scottish waters in order to stop this unauthorised activity. Other avenues may also offer realistic opportunities to achieve this objective and these are actively being explored.

Actions

3.6.5. The new provisions introduced through the Aquaculture and Fisheries (Scotland) Act 2013 (in force from 16 September 2013) have further strengthened Marine Scotland's hand in addressing how the illegal equipment used in electro-fishing is seized and dealt with:

• Fixed Penalty Notice ( FPN) consultation with industry is due to commence with the level of FPN being increased to a maximum of £10,000. Sections 60 and 61 of the Act.
• New additional powers for British sea-fishery officers ( BSFO's) are fully covered under the Act from Sections 35 to 58 and in particular Section 39 the power to inspect and seize objects suspected to be in use for commercial sea fishing such as generators, cables, probes being used for electro fishing.

3.6.6. Marine Scotland is currently considering new licence conditions focusing on creating a specific additional authority, with tougher and more enforceable conditions to minimise the risk of electro-fishing. This initiative will require anyone involved in the razor fishery to make a specific application for an authorisation allowing them to prosecute the fishery through legal means. As part of the application process a vessel inspection will be required and checks will be made with HSE and MCA to ensure that all necessary authorisations are in place prior to the Marine Scotland licence being issued. It is currently envisaged that applications will be invited in the New Year with inspections undertaken and new razorfish licences issued by April 2014.

3.6.7 The SLRWG endorses this action.

3.7 New entrants' scheme

3.6.1 The Scottish Government wishes to work with the fishing industry to restore the identity and status of fishing as an occupation of choice, including for young people in our coastal communities and beyond. Failure to address the problems in attracting crews for the future may have an adverse economic or social consequence for Scotland's fishing communities and wider economy. We understand there are a number of barriers for any person seeking to establish a new fishing business, including access to a licensed vessel and, where relevant, access to catching opportunities and time at sea. The costs of entry have increased as some catching opportunities have become more scarce and the costs of vessel building or refurbishment have increased.

3.7.2 The Scottish Government is committed to supporting and incentivising new entrants into the industry where they wish to embark on the first steps to operating their own vessel. It may be possible to consider the issue of new licences within strict eligibility criteria in aiding this ambition. Industry members of the SLRWG are, in principle, supportive of moves to help new entrants where there is headroom on licensing but would want the specific detail of any scheme to be discussed in advance, seeking to ensure that all possible consequences are fully explored, such as any potential detrimental impact on existing fisheries due to additional capacity.

3.7.3 The Scottish Government will consider what might be done to encourage new entrants into the fishing industry. Although any scheme would apply to both small and large businesses in the same way, it is likely to be more appealing to smaller businesses. Such a proposal could involve offering licensing incentives to first time vessel owners.

Question 6

Do you agree with the concept of licensing incentives to support and promote a new entrants scheme to the Scottish fishing industry?

3.8 Days at Sea/Effort Eligibility

3.8.1 Currently, to have Cod Recovery Zone ( CRZ) eligibility, a vessel must have a record of fishing with a regulated category of gear in any part of the CRZ for a minimum of 10 days (240 hours) at any time during the calendar years 2004‑2010. This allows the vessel to apply for an allocation of days at sea for the gear categories it is eligible for. In keeping with the proposal to make licensing simpler Marine Scotland proposes to make CRZ eligibility a simpler process and has suggested two possible options, as detailed below:

Option 1

3.8.2 Marine Scotland is willing to abolish CRZ eligibility completely, with the proviso that the Scottish Government reserves the right to allocate fishing opportunities and impose temporary constraints where appropriate. This would offer flexibility within the fleet and would mean licences could be aggregated together without factoring in TR1 ^[2] or TR2 ^[3] eligibility. However, the significant risk of this option is that if an increased number of vessels decided to apply for an allocation of effort in a particular gear category, the amount of potential days allocated per vessel could be significantly lower, as well as kW-day uptake being higher, possibly to an extent that exceeded the control total, causing the fishery to close.

3.8.3 If industry is willing to accept this significant risk, Marine Scotland would be open to implementing this option.

Option 2

3.8.4 Alternatively, Marine Scotland could keep CRZ eligibility but with the reference period being updated to the period 2006 to 2012 and with an annual roll forward thereafter. Therefore, if a new vessel started fishing in 2012 (with no history) they would need to lease in days to allow them to fish. As long as they used those days in any part of the CRZ for the minimum number of days as prescribed, they would then be eligible to apply for an allocation in the following year. The aggregation of licences would therefore remain the same. If the resultant licence was to require TR1 eligibility the licences/entitlements would all need to be TR1.

387.5 As of July 2013, there are 452 active vessels with CRZ eligibility in Scotland; 194 TR1, 208 TR2 and 50 for the remaining gear categories. A rolling reference period would see movement in the region of 6‑15 vessels a year between TR1 and TR2 (based on current data) as we catch up with changes in fishing activity. Abolishing eligibility completely will open Marine Scotland up to the potential risk of all 452 vessels applying, for example, for a TR1 allocation. However, this is unlikely to happen as vessels would be expected to seek an allocation of effort more suited to their quota holding.

3.8.6 Again, in the transfer or aggregation of licences, if either option was to be adopted, receiving administration rules would apply.

Question 7

A) Do you agree with the removal of CRZ eligibility completely?

Or

B) Do you agree that CRZ eligibility should be kept, with an updated reference period that will roll forward annually?