Depre c iation 



Depreciation rates have to be charged separately on h\ill, 

 engine, and special equipment. In the Federal Trade Commission sanrple 

 of vessels, depreciation rates on the hull of the vessel varied from 4 

 to 16-2/3 percent, on the engine from 12-1/2 to 30 percent, and on other 

 equipment from 10 to 33-1/3 percent. In many instances a portion of the 

 cost of special equipment was charged off at one rate and the remainder 

 at another. The 10 percent rate for hull depreciation seems to he most 

 common indicating an estimated service life of 10 years for a large 

 portion of the fleet. 



Depreciation schedules for the vessel operations in the 

 Federal Trade Commission data are shown in tahle IV --■ lj-6. 



Interest — Boat Financing 



Inability to ohtain adequate financing plays ah important 

 part in impelling fishermen to affiliate with fleets. The perils that 

 shrimp fishermen with insufficient financial reserves are exposed to 

 "became apparent during the price break in 195^. Unfavorable shrimp 

 prices at that time made it impossible for many boat owners to meet 

 financial obligations and many boats were lost thi-ough foreclosure 

 proceedings as a result. 



Financing of individual vessels is done primarily through 

 commercial banks. The banks' policies with regard to financing have 

 varied with the shrimp market itself, being alternately lenient end 

 strict, A write-off period of from three to five years is common. It 

 is probably this relatively short financing period which presents the 

 greatest problem to the individual boat owner. Many vessels currently 

 being built cost forty to forty-five thousand dollars. The amortization 

 of this amount in such a short time is feasible as long as production 

 and prices remain relatively good. If a bad season is encountered or if 

 production so outruns demand as to cause a sharp price reduction, pay- 

 ments can be met only with difficiilty. 



The shrimp fishery at times suffers from credit strictures. 

 The banks in the soutliem States require amortization of their loans 

 over a maximum period of five years and more often over a period of three 

 years. The policy of the banks is to require tha highest percentage 

 possible of the revenue of each trip, for repajnnent of a loan. This 

 policy may be designed to avoid the criticism of bank examiners employed 

 by the United States Federal Reserve Banks. However, the need of repay- 

 ing large amounts in comparatively short periods is an incentive to catch 

 the largest amount of shrimp possible without regard for the principles 

 of conservation and the maintenance of the fishery resoiirces as a perpet- 

 ual source of income for future generations of fishermen. The require- 

 ment to pay up loans as quickly as possible is even more stringent in 



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