--.---. IJnit.t~cl St,aks General Accounting Office Report to the Honorable Frank H. Murkowski, U.S. Senate _...__ - _...__ .I ___.._- .” __-_ ---.-- ..-. --II.- .-..- -.._._- I-._ July I!)!)1 SEAFOOD PROCESSING Foreign Ownership of Facilities in AIaska, Oregon, and Washington 144702 REKASED LI ._._._.- -.-..-._- ...- ~--.--.--.-----.----- r: United States General Accounting Office GAO Washington, D.C. 20548 Resources, Community, and Economic Development Division B-244474 July 31,199l The Honorable Frank H. Murkowski United States Senate Dear Senator Murkowski: On the basis of your request letter and subsequentdiscussions with your office, we have examined information on foreign investment in the sea- food processingindustry in Alaska, Oregon,and Washington. As agreed, we (1) collected overall data on the seafoodprocessing industry in those three states, (2) identified data collected by federal and state agencies and examined available reports on foreign investment in the seafood processingindustry, and (3) identified types and examplesof foreign investment. We limited our work on the third objective to Alaskan facili- ties becausethey processmore seafoodthan do facilities in any other state and becausemore information is available about them. Alaska, Oregon,and Washington had nearly 1,000 seafoodprocessing Results in Brief facilities, which produced about 1.5 billion pounds of Alaska pollock, crab, salmon, and other products in 1989. The three states accountedfor about 27 percent of the volume and 33 percent of the value of all sea- food processedin this country. Agencieswithin the Department of Commercecollect data on foreign direct investment. However, none of these sourcesprovides information specifically about foreign investment in seafoodprocessing. The Foreign Direct Investment and International Financial Data Improvements Act of 1990 should improve the overall quality and availability of informa- tion about foreign investment in U.S. industry. The three states have differing requirements for the disclosure of own- ership interests for businessoperations in the states. Alaska collects the most information, No state agency collects information on loans from, or other nonownership involvement with, foreign sources. A 1990 report prepared by Alaska’s Legislative ResearchAgency for the Alaska legislature estimated that 37 percent of the 347 Alaskan Page 1 GAO/RCED-91-127 Seafood Processing 5244474 processingfacilities studied had someforeign ownership in 1989.1Japa- nesecompanies accounted for most foreign ownership, while Norwe- gian, Canadian,and English companies(in that order) accountedfor additional ownership. In addition to ownership, we found examplesof foreign involvement through construction loans, sales agreements,or representatives in company managementpositions. About 8.5 billion pounds of seafood,worth about $3.2 billion, were Background caught in the United States in 1989,Alaska pollock was the speciesmost caught in 1989-about 2.4 billion pounds. Much of this pollock is processedinto a product known as surimi, a substancethat is made into imitation crab, shrimp, and other products. The seafoodprocessing industry consists of facilities that head, gut, fillet, freeze, and otherwise processfish into secondaryproducts. Someseafood processing facilities are shore-based(on land), while others are at-sea(aboard ship). Shore-basedand at-seaplants generally processsimilar products. Factory trawlers and other at-seaprocessors can processand quick-freezefish within a few hours of harvest, saving the time and expenseof holding fish and transporting them to shore- basedprocessing plants. Factory trawlers generally range in size from 160 feet to 300 feet, and their crews can exceed100 persons.The fleet is able to operate year-round on the fishing grounds, making short port calls for fueling, transferring processedseafood, changing crews, and resupplying the vessel.In contrast, shore-basedfacilities rely on vessels to bring fish to them. About $1.4 billion worth of seafoodwas harvested in Alaska, Oregon, Size of the Seafood and Washingtonin 1989.This amountedto 44 percent of the total Processing Industry in national harvest. Alaska ranked first amongthe states in the dollar Alaska, Oregon,and value of fish harvested. Washington and Oregonranked sixth and tenth, respectively. The combinedcatch in these states was about 4.4 billion Washington pounds. It consistedprimarily of Alaska pollock, salmon, and crab. It also included flounder, Pacific cod, rockfish, sablefish, sole, and other species. Also, of the three states, Alaska is the primary producer of seafood products. In 1989,about 1.2 billion pounds of seafoodwere processedin ‘The agency did not include all Alaskan seafood processors in its study. For example, it decided to drop all small processors becauseit doubted that they were susceptible to foreign ownership. Page 2 GAO/RCED-91-127 Seafood Processing -- B-244474 Alaska, which were valued at about $2 billion. Relative to the national total, this comprised23 percent of the volume and 27 percent of the value. Oregonaccounted for 1 percent of both volume and value, and Washingtonaccounted for 3 percent of the volume and 5 percent of the value. Alaska had 660 facilities in 1989,compared with 56 in Oregonand 257 in Washington,according to the National Marine FisheriesService. Almost two-thirds of Alaska’s facilities were at-seaprocessors, while the others were shore-basedprocessors. Most of Alaska’s shore-based processingplants are located in coastal communitiesalong the Aleutian Islands, on Kodiak Island, and in south central Alaska, Fish for these plants are brought by smaller vesselsthan those used for at-sea processing.(Information was not available on the split between at-sea and shore-basedprocessors in Oregonand Washington.) Becausemany companieshave multiple shore-basedplants or processingvessels, the number of plants in the industry is greater than the number of processingcompanies. We also found that someproces- sors have one or more plants in Alaska, but have their headquartersin Washington,especially in Seattle.This is generally becausemore of the supporting industry- insurance,banking, various professional and managerialservices, and significant amountsof vesselrepair and main- tenanceservices -is located in the Seattle area than in relatively remote processinglocations in Alaska. For example,one processingcompany, although headquarteredin Seattle, had about 20 facilities that harvest and processseafood throughout Alaska and Washington. Although federal and state agenciescollect certain data about foreign Availability of investment in this country, these data do not relate specifically to the Information on seafoodprocessing industry. However, the Foreign Direct Investment Foreign Involvement and International Financial Data ImprovementsAct of 1990(Pub. L. 101-533,enacted Nov. 7, 1990) should lead to better federal data. The in SeafoodProcessing most detailed information we found about industry ownership came from a one-timestudy by an agencyof the Alaska State government. The study was basedprimarily on data collectedregularly by Alaska. Within the U.S. Department of Commerce,the Bureau of the Census,the Bureau of EconomicAnalysis, and the International Trade Administra- tion collect various data on foreign investment. However, none of these agenciescollects and reports data specifically on foreign investment in the seafoodprocessing industry. The Department of Transportation’s Page 3 GAO/RCED-91-12’7 Seafood Processing R-244474 CoastGuard, incident to its licensingof vesselsto participate in US. fisheries, collectscertain ownership information on at-seaprocessors and other vessels.However, it doesnot require applicants to report the owner’s nameor specific percentagesof ownership. The Departmentof the Treasury collectsdata on foreign investment in investment portfo- lios, which includesbonds and other debt instruments as well as equity interests. BecauseTreasury ’s data are limited to portfolio investments, rather than direct investments,we will not discussthese data further. The 1990 act is intended to improve the quality and availability of infor- mation about foreign investment in U.S. industry. It requires the Secre- tary of Commerceto prepare an annual report on foreign direct investment in the United Statesaddressing the history, scope,trends, market concentrations,and effects on the U.S.economy of such invest- ments. The act requires, for the first 3 years, that the General Accounting Office (1) analyzethe report and recommendchanges, (2) recommendimprovements in the collectionof such data, (3) review the status of reconciliation of data and recommendimprovements, (4) rec- ommendpossible additional policy coordination within the executive branch affecting foreign direct investment, and (5) recommendimprove- ments for data coverage,industry classification, and consistencyamong federal agenciesof their respectivesurveys. The act also permits certain federal agenciesto share data, which they were previously precluded from sharing, in order to produce more detailed information on foreign investment. At the state level, Alaska, Oregon,and Washingtoncollect different amountsof information about ownership interests for businessesoper- ating within their boundaries.Alaska has the most data available on owners of seafoodprocessing plants sinceit requires corporations doing businessin the state to report biennially on their ownership. (The April 1990 report cited below is basedon these data.) Oregondoes