4.1 Origin and Need
4.2 Economics of Product Certification
4.3 Characteristics of Product Certification Schemes
Mandatory product certification (and catch documentation) is used as a natural extension of normal monitoring and enforcement in fisheries. Product certification is most commonly applied in fisheries where there are particular monitoring and enforcement problems (e.g., in regulating access to a fishery). It has gained heightened importance with the adoption by the FAO Council in 2001 of the International Plan of Action (IPOA) to prevent, deter and eliminate IUU fishing that encompasses, inter alia, internationally agreed market-related measures including the possible adoption of multilateral catch documentation and certification requirements (Box 10).
Fisheries managers have always used information for monitoring fisheries and as a basis for enforcing policies. Information is used as a basis for assessing economic, biological and social parts of fishery systems. Responding to changes in these parts of the fishery systems, managers use policies with a view to improving performance. The activities of fishers are monitored and the information collected is used to encourage increased compliance with rules (e.g. by apprehending rule-breakers) as well as to identify where further policy changes may be required. The solid lines in Figure 3 show a simple representation of these information flows.
Box 10: Excerpts from the 2001 FAO IPOA to Prevent, Deter and Eliminate IUU Fishing
68. States should cooperate, including through relevant global and regional fisheries management organizations, to adopt appropriate multilaterally agreed trade-related measures, consistent with the WTO, that may be necessary to prevent, deter and eliminate IUU fishing for specific fish stocks or species. Multilateral trade-related measures envisaged in regional fisheries management organizations may be used to support cooperative efforts to ensure that trade in specific fish and fish products does not in any way encourage IUU fishing or otherwise undermine the effectiveness of conservation and management measures which are consistent with the 1982 UN Convention.
69. Trade-related measures to reduce or eliminate trade in fish and fish products derived from IUU fishing could include the adoption of multilateral catch documentation and certification requirements, as well as other appropriate multilaterally-agreed measures such as import and export controls or prohibitions. Such measures should be adopted in a fair, transparent and non-discriminatory manner. When such measures are adopted, States should support their consistent and effective implementation.
70. Stock or species-specific trade-related measures may be necessary to reduce or eliminate the economic incentive for vessels to engage in IUU fishing.
71. States should take steps to improve the transparency of
their markets to allow the traceability of fish or fish products.
Box 11. Examples of Product Certification to Assist Fisheries Management Initiatives
Figure 3. Information Flows in a Fishery
The interest in product certification stems from a recognition that it can be a valuable tool to help achieve conservation and management objectives. The value of this tool is enhanced in certain fisheries. Such fisheries may have particular enforcement problems or there may be difficulties in restricting fishers access. These will be discussed in more detail in the next part of this section.
In this part the benefits and costs of product certification are discussed. Benefits include the rewards from assuring responsible fishing and from a possible increase in prices where relevant information is passed on to consumers. The costs are those incurred by fishers, governments, importers, exporters, distributors and merchants in maintaining and complying with these schemes.
Benefits of certification
Rewarding responsible fishing
A variety of objectives underpin the management of fisheries. These objectives relate to the culture of country and usually comprise economic, social and biological factors. The objectives are also derived from international obligations (e.g.1982 UN Convention). In most fisheries, laws and regulations are used to facilitate the achievement of these objectives. These laws and regulations usually allocate access to fishers (e.g., permits, licences, quotas). Fishers take on these access rights, subject to rules and conditions that are designed to meet other fishery objectives.
In some fisheries, there can be strong incentives to cheat on these laws and regulations. The higher the economic gain from avoiding the management controls, the greater the incentive for illegal behaviour. Furthermore, for fisheries where the risk of detection is low, fishers will be tempted to circumvent management controls. Three of the product certification schemes identified in Box 11 relate to fisheries that are high value but, due to their characteristics, are located where it is difficult to detect illegal behaviour. Antarctic toothfish, Atlantic bluefin tuna and southern bluefin tuna are all very high value species. The fishing is carried out in areas of the Atlantic, Indian, Pacific and Southern Oceans where monitoring and enforcement is expensive and difficult. The results of this combination of factors are sobering: 90,000 tonnes of Antarctic toothfish have been taken by IUU fishers over the past three years - more than twice the level of catches taken in CCAMLR regulated fisheries. Reporting on a survey conducted by the FAO on IUU fishing, Bray (2000) notes the significant economic gains available through IUU fishing. In a perverse sense, the more legal fishing is constrained by catch and effort limits the greater the motivation for and gains from IUU fishing.
The losses associated with illegal and unregulated behaviour penalise responsible fishers and can cause irreversible damage to fish stocks. Both current and future generations are therefore affected. Product certification offers a way to mitigate these losses. If conducted effectively, it can remove the economic incentive for illegal behaviour. Fishers who cannot demonstrate that their product has been caught in accordance with fisheries conservation and management measures will not be able to sell it. While not overcoming the problems of detection of illegal behaviour at sea, product certification can choke off the high revenues resulting from such practices.
We can identify two important economic benefits from product certification:
Because of its fisheries management orientation, product certification is mandatory. Fishers dont have a choice as to whether or not they comply with these schemes. As a consequence, it is often argued that product certification may not offer opportunities for price premiums to be realised. It will not be possible for consumers to choose between certified and non-certified because of the mandatory nature of the scheme and, in some cases, the certification information may not be made available.
Nevertheless, by applying the analysis developed above in the section on ecolabelling, it is possible that an appreciation of the price of the certified product may occur. Lancaster (1971) characterises consumer demand for products as demand for a bundle of attributes, where each product has one or more attributes. The argument follows that a good by itself does not yield utility, but that it possesses characteristics (attributes) that create utility. If demand represents consumers willingness to pay for various amounts of attributes, then the provision of information about new attributes - e.g. through product certification - may lead to an increase in demand. An improvement in prices should result. Again, this argument presupposes that the information on product certification is made available to consumers. In introducing its new policy on labelling of fish products in the Common Organization of Markets, the European Community suggests that better labelling and information will lead to an increase in demand.
The Community also suggests that product certification will lead to more certainty for consumers in buying fish. Apparently this can be a problem for live, fresh and chilled products that are not packaged. If certification can reduce the likelihood of consumers being misled, or having to make decisions on insufficient information, then an additional product attribute will be created. As discussed above, attributes create utility. Provision of new fish product attributes may lead to an increase in demand and price.
Costs of certification
Product certification systems impose a burden on all who are associated with their implementation: governments, fishers, merchants, distributors, exporters, importers and retailers. This burden includes the establishment of the system and its operation and is a strong function of the system design. The more complicated the system, the greater the burden for all involved.
The costs to the government are incurred in:
Taxpayers may have to pay most of the costs associated with these government activities. In some situations, the costs of acquiring forms and transmitting information may be passed onto fishers.
Fishers costs can arise from increased reporting requirements in:
Unlike government costs, the burden placed on fishers has important implications for the success of a product certification programme. Fishers always have an incentive to reduce costs and the costs associated with a product certification system are no exception to this rule. Further, the greater the burden of compliance then the larger the incentive to avoid complying with the system. A system that minimises the above costs will therefore have a greater likelihood of voluntary compliance by fishers.
Low levels of voluntary compliance create costs that governments presumably wish to avoid. The first cost is the undermining of the objectives the system is working towards (e.g., conservation and management of fish stocks). This first cost leads to a second cost: increased government costs of monitoring and enforcement. It is therefore normally preferable that a system be designed in a way that minimises compliance costs for fishers. That way, fisheries authorities have made their best efforts - within the constraints of the systems objectives - to reduce incentives for non-compliance. As product certification systems gain favour as a way to support management initiatives in international fisheries, consistent and - where appropriate - similar approaches will assist voluntary compliance.
Costs incurred by merchants, distributors, exporters and importers
The costs incurred by merchants, distributors, exporters and importers are similar to those incurred by fishers. Filling out statistical documents and having them verified by an authorised person are the additional tasks that these sector participants have to undertake. When dealing with a valuable perishable product (e.g., fresh bluefin tuna), a system that causes delays can reduce the product value. Merchants, distributors, exporters and importers face similar incentives to fishers when it comes to compliance with product certification schemes. That is, the greater the burden and cost of complying with product certification, the larger the incentive for non-compliance.
Recognising that product certification can have beneficial effects, the International Coalition of Fisheries Associations nonetheless notes that ...the proliferation of different forms, reporting to differing government agencies, at differing points in the chain of custody is creating confusion among seafood dealers in the global marketplace and may begin to place an undue restriction on trade. Such schemes, if standardised, would generate familiarity and comfort for seafood traders and thus create an incentive towards compliance. (Justin LeBlanc, ICFA, e-mail communication, 17 Jan. 2001).
In this part the characteristics of product certification schemes are discussed. These are: the linkage of these schemes with management objectives; their mandatory nature; the level of government involvement; their validation procedures; and, in the international arrangement context, how they deal with non-participants.
Closely Linked with Management Objectives
Many product certification schemes are closely linked to a specific management objective. The example quoted above of the ICCAT bluefin tuna statistical document illustrates this point. Information collected from the document was used to encourage correct reporting of catches and to improve overall compliance. Box 12 outlines the objectives of the CCAMLR catch documentation scheme.
Box 12. Objectives of the CCAMLR Catch Documentation Scheme
i. To monitor the international trade in toothfish;
ii. To identify the origins of toothfish imported into or exported from the territories of Contracting Parties;
iii. To determine whether toothfish imported into or exported from the territories of Contracting Parties, if caught in the Convention Area, was caught in a manner consistent with CCAMLR conservation measures; and
iv. To gather catch data for the scientific evaluation of the stocks.
The origin of product certification schemes is often a need to support specific conservation and management initiatives. Fisheries managers are frustrated with the inadequacy of traditional monitoring and enforcement tools, particularly in high value international fisheries. A specific management need, therefore, often shapes the product certification scheme. For example, the United States of America tracks trade in tuna so that it can meet its obligations under the IATTCs International Dolphin Conservation Programme. Here IATTC member countries need to be able to substantiate the origin of the tuna and how it was caught. In meeting its obligations, the USA requires that people wanting to export to it provide a certificate of origin. That certificate includes information on area of catch, gear used, vessel flag, and whether the tuna has been harvested in a dolphin safe manner.
Some schemes are not closely linked to specific management objectives. But nonetheless the schemes are seen as providing a valuable source of additional information to support conservation and management. For example, the EUs new rules on labelling of fisheries products do not appear to be linked to specific management objectives. But the labelling process is intended to provide valuable information regarding the origin of the fish that can be used to cross check against that collected when the fish is landed at port.
All product certification schemes listed in Box 11 are compulsory in nature. This compulsion arises from the origin of the need for the scheme. To effectively support fisheries management, coverage of the scheme should be as complete as possible. Incomplete coverage has negative consequences:
Incomplete coverage of product certification schemes is an issue confronting international conservation and management arrangements. Participants in these arrangements can address the mandatory element of the schemes by passing laws in respect of their own jurisdictions (fishers, importers, etc). But the problems of non-participant fishing, unauthorised and illegal fishing remain. Overcoming these problems can effectively be done by ensuring that final market countries also agree to adopt mandatory compliance with the product certification scheme. In the case of the CCAMLR, major importing markets like Japan and the United States of America require verified catch documentation to accompany the toothfish imports. The same applies for bluefin tuna and swordfish from ICCAT fisheries that is imported into the European Community, Japan and the United States of America.
Product certification schemes are generally administered by governments. The schemes usually come from a need identified by fisheries managers, either in a domestic or international context, and governments usually implement and manage the schemes. The degree of involvement was indicated above in the discussion on government costs: developing documentation systems; verifying documents; making decisions; and monitoring systems. A range of government agencies that cover fisheries management, international affairs, customs, and law enforcement conducts these activities.
Some documentation systems allow certain government functions to be delegated to another entity. This allowance reflects the difficulty with having a government person on hand to verify every transaction, whether it is on the high seas or at a fish landing point before being transported to a fresh fish market. For example, in the CCSBT statistical document, validation of catch documents has to be done by the competent authority of the flag state of the vessel that harvested the southern bluefin tuna. This requirement can however be met by an entity delegated such authority by the flag state. Any CCBST member country that uses this option is required to submit a certified copy of such a delegation to the Commission.
Chain of Custody and Validation
Ensuring that the chain of custody of the products, from harvest to importation into final market, is critical to the effectiveness of a product certification scheme. To ensure chain of custody of the product throughout the transactions in the global fisheries marketplace, validation by appropriate authorities is required. Without such assurances, it is impossible to know if the product being sold into the final market has been caught according to conservation and management measures. Some product certification systems do not assure, by government validation, the chain of custody along the line of product transactions. It could be argued that such approaches undermine confidence in the product certification system.
One of the most comprehensive product certification schemes is that used by CCAMLR for Antarctic toothfish. Contracting parties to CCAMLR have agreed not to import toothfish that do not have an accompanying catch document. A simple representation of the CCAMLR scheme is provided in Figure 4.
Figure 4. Simple Representation of CCAMLR Catch Documentation Scheme
Throughout the process, transactions between fisher, importer, exporter (and even re-exporter, if necessary) are verified by flag state, port state and exporting authorities. A fisher authorised to fish for toothfish by his or her flag state will also receive a catch document. When the fisher wants to land the catch, the flag state will determine whether the toothfish have been caught in accordance with its authorisation. If it has, then the flag state will give the fisher a unique flag state confirmation number. When the fish is landed the catch document is then countersigned by a port state official. In doing so, the port state official confirms that the catches landed agree with those specified on the document. By this method the flag state assures itself that the fisher has acted in accordance with the authorisation.
As the product is traded onwards, the catch document (or copies of it) goes with it. Along the way, relevant authorities check and verify the accuracy of the document vis-à-vis the product it is associated with. Importing countries have the opportunity to go back to the flag state referred to in the catch document to establish the legitimacy of the document. If the flag state does not verify the legitimacy of the document, the importation of the toothfish can be refused. Thus, validation by appropriate authorities occurs throughout the product life of the toothfish.
Schemes that generate proof of compliance with management and compliance measures early in the product certification process appear to be useful. If the document is closely aligned to fishers activity, then the greater the chance of useful information being generated that enables people further down the chain to act in an appropriate way. Generating such documentation early in the process makes it easier for importers and traders who have to comply with mandated import requirements. For example, it may be possible for a country to prohibit the import of a fish product unless that product was caught in compliance with an international management measure. However, it creates difficulties for importers, exporters and traders if there is no system that can provide a verification stretching back to the harvester. Unless backed up by verification systems that are connected to the fishers activities, importers and exporters can be placed in a difficult situation. Often they have to act in accordance with unwieldy systems that try to trace back from the marketplace the origin of the product and whether it has been caught in accordance with a particular management regime or specific management measures. Such unwieldy systems can unduly restrict trade and, as consequence, encourage non-compliance.
Engagement with Non-contracting Parties
Engagement with non-contracting parties is of particular importance in fisheries where management is conducted through international fisheries organizations or arrangements. Parties to these organizations normally undertake to discharge their obligations under product certification schemes. The issue is: how do non-contracting parties interact with these schemes? There appears to be three ways this interaction can occur:
i. If they want to import into the territory of a contracting party, the non-contracting party needs to be able to provide the required documentation.In (i) and (ii), contracting parties are able to exert pressure by requiring certain documentation to be produced. If a non-contracting party wishes to sell to an operator from a contracting party, it has a strong interest in voluntarily complying with the product certification scheme. For this to be effective, contracting parties need to make their vessel operators, trans-shippers and importers well aware of their obligations through education and information programmes.
ii. If they want to tranship their product onto a contracting party flag vessel, the non-contracting party needs to be able to provide the required documentation.
iii. If they are involved in importing, exporting, re-exporting or trans-shipping, the non-contracting party agrees to use the product certification system.
For (i) to provide a significant lever to encourage non-contracting parties to use the product certification schemes, the involvement and commitment of major seafood importing countries is critical. For example, international product certification schemes currently apply to bluefin tuna, swordfish, and Antarctic toothfish. These species are mainly sold into the markets of Japan, United States of America and the European Community.
Some schemes further refine the interaction with non-contracting parties. Even if non-contracting parties meet the obligations of a product certification scheme, they can face further examination. ICCAT uses information collected by its bluefin tuna statistical document programme (and from other sources) to assess whether the non-contracting partys activities have undermined the effectiveness of the bluefin tuna conservation programme. If the non-contracting party doesnt take action to try and rectify these activities, actions can be initiated that may result in contracting parties using trade restrictive measures against imports from that non-contracting party.
International organizations and arrangements adopt approaches to try to actively engage non-contracting parties in conservation and management initiatives. And the application of product certification systems is no exception to this way of working. As part of its policy to enhance co-operation with non-contracting parties, CCAMLR:
This approach provides a useful model for dealing with non-contracting parties to a product certification scheme. The goal is always their participation. Education and information need to be provided to the non-contracting parties so that they can clearly understand how they could implement the scheme. Once this is understood, it may then be prudent to explore the consequences of them not complying with the scheme.