Restrictions, Financial Problems Sink Gaff Into U.S. Tuna Fleet

If federal authorities stop American tuna boats from fishing near the dolphins that indicate the presence of large schools of fish, it could spell the final blow for the beleaguered fleet, many fishermen say.

The National Marine Fisheries Service has said the tuna fleet may reach its annual quota for dolphin kills in August, at which point U.S. fishermen would be barred from fishing near the dolphins in the Eastern Pacific, effectively shutting down the purse-seining fleet for the remainder of the year.

Some fishermen say the fleet has been pushed to the edge of ruin by foreign competition, a continuing slide in the price of tuna and escalating insurance costs.

“If they shut down the fleet, you can forget it. The boats are either going to go somewhere else or they’re going to go bust,” said Jeanne Virissimo, who manages a small armada of tuna boats captained by her father and five brothers. With the majority of boats on the brink of bankruptcy already, the ban would be fatal to many boat owners, she said.

For four generations the Virissimos have set out to fish for tuna under the American flag. In the early 1920s Virissimo’s great-grandfather and grandfather arrived in San Diego from Portugal and entered the tuna fishing industry--first as fishermen, later as captains and finally as boat owners. Virissimo’s father Alvaro and her five brothers all began fishing while they were in their teens.

Family Tradition

For the male children, “it was not even a question” as to what their occupation would be, Virissimo said. “It was simply assumed that they would go out to fish; it looked like a great livelihood for a while.”

By the early 1980s the Virissimo clan had amassed five enormous purse seiners--the type of boat used to harvest the majority of tuna consumed in the United States--each valued at millions of dollars. Each of Virissimo’s brothers commanded a boat of his own, and her father managed the operation from shore.

Today the family’s holdings have been reduced to two boats and they lease a third, forcing the brothers to double up on the boats. Unless the market improves, the last ships will be lost, Virissimo said.

“I think we would give up our citizenship before we gave up fishing. The boys have fished all their lives; they don’t know any other trade. Besides, we’re Portuguese, we’ve got seawater flowing through our veins!” she said.

Dramatic as the reversal of the Virissimos’ fortunes has been, it is a story that is repeated throughout San Diego’s tuna-fishing fleet.

Given the weaknesses in the fleet, prohibiting fishermen from fishing tuna by locating and sometimes netting dolphins could be disastrous, said August Felando, president of the American Tunaboat Assn., which represents boat owners.

In the Eastern Pacific, where the majority of U.S. vessels fish, fishermen locate schools of tuna by finding the dolphins under which they habitually congregate. After encircling both tuna and dolphins in their huge nets, the fishermen allow a section of the net to submerge, permitting the dolphins to swim out.

While the majority of dolphins are saved, some are trapped and drown. The fisheries service monitors the number of dolphin kills and limits it to 20,500 a year.

1986 Kill Estimate

This year the kill estimate reached 16,000 by June 1, and the fisheries service believes that the ceiling will be reached next month, said Charles Fullerton, regional director of the fisheries service. Fishing on dolphin has been banned only once before--at the very end of a season, he added.

Felando said that foreign fishermen rarely worry about the rate at which the dolphins are slaughtered, and that banning American fishermen will only replace them with less scrupulous competitors.

A 1984 amendment to the Marine Mammal Protection Act states that countries from which tuna is imported must demonstrate compliance with U.S. standards, but the regulation has never been enforced.

Dr. Charles Karnell, chief of the protected species division of the fisheries agency, said: “The government’s information indicates that the rate of incidental kills in most foreign fleets is comparable to that of the U.S. fleet. But if they don’t have a regulatory program, the law could pose a roadblock for them.”

U.S. tuna fishermen question the fisheries service’s statistics, claiming that a reduction in the number of monitors earlier in the year caused a high estimate. Because of Felando’s complaints, the fisheries service is placing observers on every boat that leaves port.

Fishing has always been a perilous business, with ships placed at the mercy of typhoons, pirates, great fish and other vagaries of the sea. But the storms that have decimated the tuna fleet in the last few years have been of a different nature, emanating from the roiled realms of interest rates, liability law and the price of fish.

From a peak of 129 ships in 1979, the purse-seining fleet in the United States has been reduced to 86 boats. While a handful of those have been lost at sea, the majority have been lost to banks or have been purchased by foreign tuna fleets. The last new U.S. purse seiner was launched in 1983; since then 27 American boats have been sold to foreign buyers.

As late as a decade ago, the U.S. fleet dominated tuna fishing in the Eastern Pacific. Today they are outnumbered by foreign flag vessels by more than two to one.

In the competitive struggle with foreign fishermen, American boats are hobbled by high labor costs and excessive government interference, Felando said.

Advantages for Foreigners

Unlike the canning industry, which is protected by tariffs, tuna fishermen have traditionally been unshielded from foreign competitors with their lower labor costs. Other than a prohibition against foreign fishermen unloading directly at canneries on U.S. soil, there are no tariffs or restrictions on the importation of raw fish.

In the past American fishermen have relied on technical innovations to stay ahead of the competition, developing the purse-seine technique in the 1950s--which netted a tenfold gain in productivity over the more primitive bait boats. Since then American boats have pioneered the use of helicopters, satellites and sonar to locate schools of fish.

With crews of 18, the seiners go to sea for months at a time and surround schools of tuna with nets that are four-fifths of a mile long, returning with more than a thousand tons of fish frozen in their holds.

Ironically, the fishermen say, this same technology is being sold to foreign fishermen at bargain basement prices, eroding America’s technical lead and decimating its stock of ships.

“Essentially, we’re selling off an entire industry to foreign countries,” Felando said. “Since the beginning of the century there has been an identification between this area and the tuna industry. Now we’re in danger of losing that, and the people that own the labels just don’t seem to care.”

Of 66 active boats in the American fleet, 51 are owned and operated by San Diegans, even though many have not entered the port since the closing of local canneries.

Relations With Canners

In years past, the relationship between the fishermen and the canners has often been cordial, as the canneries offered financial backing and technical advice to the fishermen who supplied them, Felando said. In the late 1970s, as the demand for tuna surged, many of the canners encouraged the fishermen to expand their holdings.

Thus in the early 1980s, just as inflation and interest rates were cresting, more boats were ordered and built. As these boats arrived, the American canneries in the continental United States began to shut down. By 1984 both of San Diego’s canneries had closed; a small cannery on Los Angeles Harbor run by California Home Brands is the last in operation.

Some of this canning capacity was shifted to plants in Puerto Rico and American Samoa, and many of the San Diego seiners unload there. Boats that are based in Samoa no longer stop in San Diego to be fueled, repaired and refitted.

Further, many canners have begun importing canned tuna from Thailand, placing their own labels on tuna that is packed by foreign firms. In 1977 only 5.9% of all tuna sold in America was imported; by 1985 that figure had risen to 28.2%.

To reduce the price of fish, canners have also promoted the development of foreign fishing fleets, providing financial backing for the purchase of ships to Venezuelan, Korean and Taiwanese fishermen, Felando says.

Tuna sales in the United States are dominated by only a handful of canners--in 1985 Star-Kist Foods; Van Camp Sea Foods, which sells Chicken of the Sea, and Bumble Bee Seafoods commanded 71% of the market--and some fishermen claim that the canners have taken advantage of this oligopoly to lower the price of raw tuna. Since 1980, when the price of raw tuna was roughly $1,110 per short ton, the price has fallen to $736 for a short ton of average fish, Felando said.

Anti-Trust Suit

In February, 1985, 31 independent boat owners filed a lawsuit seeking $850 million in damages from the three major canners, claiming anti-trust violations. The suit, according to attorney Maxwell Blecher, who represents the boat owners, also alleges that the canners sold boats that had been repossessed from American owners to fishermen in Ecuador and Venezuela.

Most of these foreign sales have been orchestrated by William J. Horner, whose Marine Service Enterprise Corp. is the world’s largest broker for tuna boats. Until 1979 Horner was the No. 2 executive at Van Camp Seafoods, a subsidiary of the St. Louis-based Ralston Purina. When a management shakeup in St. Louis cost Horner his job, he decided to put his worldwide network of contacts to work as a private consultant.

In the last six years, Horner has sold more than 25 U.S. vessels and a cannery to foreign buyers.

Because of their technological superiority and the availability of parts, U.S. boats are favored by foreign buyers, he said. “There are an awful lot of people in the Far East who believe that if they can get their hands on a U.S. boat they can make a go of it in the business,” he said.

“The problem is finding somebody who wants to sell. If you go down to the docks, every guy there will say, ‘Sure, my boat’s for sale,’ but they have to be willing to sell it at the market rate.”

The market rate has undergone a precipitous decline as the bankruptcy rate among fishermen has climbed. A 1,200-ton boat that cost $10 million to build in the early 1980s may sell for less than $1 million today, he said.

A few years ago sales of boats that had been foreclosed on were rare; today they make up the majority of his business, Horner said. Because tuna boat owners are so highly leveraged, putting up as little as 10% of the cost of their vessels, many are now servicing debts several times larger than the value of their boats, he said.

“When they reach that point, there is no way they can afford to sell their boats,” Horner said.

Although the canners have benefited thus far from the falling price of tuna, Horner believes that their strategy may eventually backfire.

“The canners will tell you that they are lowering the price in order to stay competitive with foreign competition, but I believe that now they are just using this as an excuse to increase their own profits,” he said.

“At this point we’re not talking about weeding out the inefficient (boat) operators; you have people who have done all that is humanly possible to stay competitive and are still going out of business,” he said. “The canners are imposing terms that would have been considered completely unacceptable a few years ago.”

Threat Posed

If the trend continues, Horner believes that the canners will find themselves without any U.S suppliers, and they will become vulnerable to price increases by foreign fishermen.

However, Ed Ryan, vice president of Star-Kist, the largest U.S. canner, said that the canners are “deeply concerned” with the fishermen’s welfare. Star-Kist maintains a partial interest in about 20 vessels, some domestic and some foreign, he said.

“We’re still very dependent on the U.S. fleet, so when fishermen go out of business we have to find a replacement source,” Ryan said. “If the decline of the American fleet continues this would present a problem for us.”

Ryan declined to discuss the alleged anti-trust violations.

Next to the decline in the price of tuna, a skyrocketing number of lawsuits by crew members and a corresponding rise in the cost of liability insurance is the greatest cause of the fleet’s woes. Boat owners say that unscrupulous lawyers and unrealistic jury settlements have made it too dangerous to leave port.

Pointing to a stack of folders that filled the bottom half of a closet, Virissimo said, “This is our lawsuit collection, a new entry every day. I don’t even like to look in there any more. The only people that aren’t suing us are family, and sometimes I start to worry about them as well!

“We had one boat where every single crew member sued us. I don’t blame them though, the way the law is written it’s like someone is dangling a whole big wad of cash in front of their faces, and they’re not making the money they used to either. The lawyers know that it’s a weak law and they’re taking advantage of it.”

Suits by Crewmen

From less than a dozen lawsuits annually for the fleet in the early 1970s, the toll has risen to 107 cases in 1985, with awards stretching to $1 million in some cases, Felando said.

“We have some law firms that are soliciting the crew members on the docks. We even tried to get one firm disbarred by the California Bar for unethical conduct. You have some fishermen who claim they can never fish again and who are out on the very next boat,” he said.

Insurance companies are now so wary that few claims actually make it to trial, and the cost of protection and indemnity insurance for tuna vessels has increased fivefold in the last decade.

Felando has testified in Washington about the liability crisis, and there is bill in the House that would limit awards where gross negligence or willful misconduct is not involved. The bill is expected to pass the House, according to a House Merchant Marine and Fisheries Committee spokesman.

Rather than await a possible showdown in August when the fisheries service may order a halt to purse seining, tuna boat captain Douglas Smith has decided to find calmer regulatory and legal seas in which to fish. Smith, whose laconic manner, deep tan and burly build embody 32 years spent at sea, signed on as a crewman at the age of 13. By the age of 18, he had bought a boat and since then he has skippered bait boats and purse seiners in every ocean where tuna are found.

The boat he captains was built three years ago and has made only one trip to sea. Since then it has been tied up in port, awaiting better times that are yet to come.

The bank that loaned him money to purchase the vessel now refuses to allow him to change its registration to a foreign flag for fear of losing the investment, he said. Soon its owner, the BBP Fishing Co., will declare bankruptcy and the boat will be sold in a sheriff’s sale, Smith predicted.

After months of sitting in port without being paid, Smith has decided to cast his lines in the seas off Africa.

“I think I’ll go to Ghana,” he said. “They have a real bad shortage of skilled fishermen there. The locals are so corrupt that the government is trying to put the management into foreign hands so as to attract foreign investment.”

Asked how he feels about giving up his country to keep his livelihood, Smith, who has five children, said: “I don’t like it. But I guess I like starving even less.”