Cidre: Cargo rate hike doesn’t benefit island’s business environment

By The Star Staff

Economic Development and Commerce (DDEC) Secretary-designate Manuel Cidre on Wednesday objected to the proposed increase in rates for the handling of cargo at the San Juan Port, the only point of entry for goods in Puerto Rico.

“The public policy of this administration is to promote the competitiveness of our island, reducing the costs of doing business, positioning Puerto Rico as a globally competitive jurisdiction,” Cidre said in a written statement. “This is not the time to increase rates when we are going through a pandemic and the economy is barely showing signs of recovery.”

“Just as this is not the time for rate increases for assembly and unloading charges, neither is it the time for freight rates hikes,” he added. “Both would have adverse consequences for economic development.”

A 2020 study published in Marine Policy investigated the main factors affecting the competitiveness of ports. Among 20 factors, it turned out that the main factor is the costs at the terminals, “precisely the costs that these measures affect,” Cidre said.

“At a time when we are exploring options to correct the inventory tax, which we know how it affected supplies after Hurricane Maria, we cannot continue to increase costs at port terminals,” the DDEC secretary-designate said. “We have to project ourselves as a competitive hub worldwide and by increasing costs we will not be able to compete with other destinations that do not have the same capacity or strategic location that Puerto Rico has.”

Tote Maritime, one of the island’s largest shipping companies that operates domestic cargo terminals in the Port of San Juan, and the marine support services firm Luis Ayala Colón (LAC) Sucrs. Inc. are raising their fees.

LAC, the only company in the Port of San Juan in charge of loading and unloading ships, announced it is raising its cargo fees and adding new charges effective March 1. Tote’s fee hikes go into effect a month later, but the company has not made its new fees public.

Manuel Reyes, executive vice president of the Chamber of Food Marketing, Industry and Distribution (MIDA by its Spanish acronym), along with an industry official, confirmed the information on Tote’s proposed fee hikes from members of the business community.

“This makes us less competitive,” Reyes said.

While Puerto Rico has four shipping companies, two of them control 85% of the market, Reyes said. LAC being the only company in the Port of San Juan that handles cargo creates a problem for businesses, importers and exporters that have no alternatives for escaping the fee hikes.

Reyes could not say what the impact of the hikes would be on the local economy. In 2019, MIDA did a study on the cost of transporting goods between the United States and Puerto Rico as part of a larger study on the Jones Act that found the statute causes losses of $1.5 billion in Puerto Rico.

An industry official noted that since LAC signed an agreement with Puerto Rico Terminals to create the joint venture Puerto Nuevo Terminals, they had warned of the negative impact on the economy because those companies have virtual control of the Port of San Juan.

The island Justice Department in an email message said its investigation on the possibility that the companies have created a monopoly is still ongoing. That investigation began in 2019. Under Puerto Nuevo Terminals, LAC and Puerto Rico Terminals jointly manage 80% of the maritime cargo and Crowley has the rest in the Port of San Juan.

Ports Authority spokesman José Carmona said Ports has a small area in the Port of San Juan but that the so-called joint venture is in the hands of the Federal Maritime Commission.

According to an LAC document, effective March 1, 2021 there will be new terminal fees at the company’s San Juan Terminal facility for all consignees, shippers and owners receiving and delivering equipment for all lines. The company is raising its terminal maintenance fee to $25 per full unit from the current $15 per full unit, a hike of almost 65%.

A container inspection charge of $90 per inspection was increased by $30.

LAC raised a terminal security fee to $17.50 per full unit from $10 per full unit and also added additional charges. For instance, it imposed a gate charge not covered by the stevedoring/terminal contract of $45 per gate move, a mount & discharge picks per unit of $35, and sold unit handling charges of $160.

To keep the terminal on overtime from 4-6 p.m. Monday to Friday there will be a $400 charge per hour, an increase of $100. On Saturdays and holidays, the charge could be $1,600 per hour for the first four hours, with extra hours at $400 per hour, an increase of $450 per hour.

LAC also imposed new charges that range from $35 to $75 per unit for office hire and sold containers and shipper-owned units. The firm also imposed five stevedoring charges for non-contract clients that include an overtime differential cost of $800 per hour.

In the case of Tote, industry officials noted that the new hikes will start in April and include total accessorial charges that are going up to $310 from $245.

International Longshoremen’s Association Local 1740 President Carlos C. Sánchez Ortiz said the union has warned for years about the concentration of power in a few maritime companies without government supervision.

“This corporate framework involves risks that must be avoided at all costs, since they will increase inescapably the costs of all consumer goods and services, and even border on risk to national security,” he said.