CHAPTER VII

A. GENERAL

This chapter discusses insular trucking including traffic distribution patterns and pickup and delivery rate levels of containership operators on movements between the water carriers' terminals in Puerto Rico and the shippers' and consignees' places of business (sec. B). The chapter also deals with carriers' substitution of direct-call vessel service at Ponce and Mayagüez with overland trucking service from San Juan, Section C analyzes various aspects of Puerto Rico's trucking industry including size, composition, and quality of service and represents a joint study conducted by the FMC and the Public Service Commission of Puerto Rico. The Public Service Commission of Puerto Rico (PSC) is the independent regulatory agency acting under the auspices of the Puerto Rican government as signed the role, inter alia, of regulating motor carrier services operating on the Island.

1. The Role of Trucking Services in Puerto Rico's Economic Development

For all practical purposes, trucking is the only means by which goods can be transported between various points on the Island. No railways are presently operat ing, there are no inland waterways, and general barge movements are limited to the transportation of a few bulk commodities over short intracoastal distances. Except for rare instances, the relatively small size of Puerto Rico acts to inhibit inland freight transporta

IN PUERTO RICO

tion by air. Further, for the most part, there are no major pipeline systems in Puerto Rico. (When such pipelines are built, they may be used to move petroleum derivatives from the refineries located on the southern sector of the Island to a few major consumption points, such as gas outlets in the metropolitan area of San Juan.) Thus, for the forseeable future, indications are that the overwhelming proportion of Puerto Rico's import traffic and associated inland transportation will not only continue to depend upon the pickup and delivery services rendered by the Island's trucking industry but will show an increasing demand for this service.

Containerization and associated pickup and delivery services, hereinafter referred to as P/D service,1 are expected to play a central role in Puerto Rico's economic development. In 1967, there were an estimated 4,001 trucking firms operating in Puerto Rico: 20 large size firms; 37 medium size firms; 325 small size firms; and, 3,619 one-truck operators.2 Containerized traffic is largely transported by the Island's generally efficient large and medium size firms while specialized and seasonal cargoes are generally moved by the numerous and less efficient small size trucking firms and one-truck operators. In 1967, the large and medium

1 "Pickup and delivery service" (P/D service) is a trucking service contained in the tariffs of most water carriers. This service substantially covers the transportation of cargo from the premises of the carrier's term. inal to a platform or doorway accessible to the trucks at the consignee's place of business, residence or warehouse; or from the consignee's place of business, residence or warehouse to the carrier's terminal.

2 Large size trucking firms are comprised of 16 or more power units (trucks and/or tractors); medium size firms, 6 to 15 power units; small firms, 2 to 5 power units; and, one-truck operators, one power unit.

size firms carried 2,782,851 tons and earned approximately $13,604,000, 70 percent of which was earned from transporting general TL and LTL cargoes under pickup and delivery services largely for cargo moving to and from the U.S. Although Puerto Rico's agricul ture declined considerably during the past decade, onetruck operators grew from 2,200 in 1959 to 3,619 in 1967, in part due to Puerto Rico's liberal certification procedures and the ability of one-truck operators to stay alive by migrating during offseason work from farm and other specialized contract operations to the urban areas and carriage of general cargo. Trucking and P/D service are generally employed in two ways: (1) In common or contract carriage by the trucking industry and ocean carriers; and (2) in private carriage by owners of the goods to be moved. In most cases, Puerto Rico's manufacturers, large stores, and other major shippers or consignees move their products in TL or LTL lots under both common and contract P/D service arrangements employing a member of the 20 large size firms or a medium size trucker. Other shippers and consignees use members of the small and one-truck firms when these operators are not engaged in moving building materials or sugar. A smaller number of shippers and consignees, however, pickup and deliver their own cargoes utilizing privately owned equipment for this purpose when transportation requirements are of a special nature not compatible with common carrier trucking. Private trucking may be economically justified for a few large shippers with sufficient volume, such as Pueblo Supermarket and other major distribution services which primarily rely on lightweight and relatively inexpensive delivery trucks.3 But, there is a considerable amount of trucking in Puerto Rico by small shippers and consignees using costly equipment. Trucking P/D service problems uncovered by FMC representatives in Puerto Rico, the Commonwealth including PSC and EDA investigators, major ocean carriers, and large and medium size trucking firms, indicate that the transportation shortcomings existing primarily in the services offered by the numerous onetruck operators and some small trucking firms may have been important factors in certain customer's de

3 As one might observe, however, most Puerto Rican business firms do not have sufficient quantities of cargo to justify the initial purchase nor the full employment of their own trucks. In Puerto Rico, the two-way employment of private trucks is economically feasible for only a limited number of shippers and consignees. Trucking's economic justification depends upon the continuous and highly efficient use of its most profitable direction of travel. Such use, in turn, depends on a larger volume of freight movement than is usually generated by the predominantly small and medium sized operations of manufacturing industries and grocery stores in Puerto Rico.

cisions to use their own trucks. Whenever serious shortcomings of Puerto Rico's trucking P/D services are responsible for the use of private trucking transportation, disturbing transportation problems are created because, with the volume and variety of their cargo movements reduced by the privately carried shipments, the regular common carrier truckers are less able to attain complete utilization of their own transportation equipment. Under these circumstances, regular common carrier service becomes less efficient and more expensive which, in turn, causes more shippers to resort to private carriage even though it may be less economical than the common carrier trucking service. The problems of island transportation and P/D services have a twofold impact on Puerto Rico's economy. They serve to reduce the profit available to the shippers/consignees from their present economic activities, and they inhibit not only the expansion of these activities by limiting the development of new industries and of larger markets for existing industries but also the geographic dispersion of industry desired by the Commonwealth (Chapter II). The result may be that plants will want to locate in the vicinity of the ocean terminals where they must depend less on trucking; and, as a result, the congestion in the major port cities. could grow. It is widely recognized by the Commonwealth that the condition of the highway network in many parts of Puerto Rico is far less than satisfactory for the high volume of traffic moving to, from, and within Puerto Rico. This situation is beyond the trucking industry's control but it inevitably hampers P/D services and makes this trucking considerably more expensive.1

Inadequacies in trucking contribute to inefficiency, under-utilization of equipment, and destructive rate. competition. For these reasons, the Commonwealth, including Economic Development Administration and PSC, are becoming increasingly aware that Puerto Rico must have an efficient, economic, and more fully regulated motor carrier service moving over adequate highways. There is already on Puerto Rican statutes, a comprehensive law, discussed more fully in the following pages, which provides for regulation of motor carriers. The PSC has made clear its intentions to more fully implement its regulatory responsibility under this law.

The relationship of highway development to transportation is discussed more fully in chapter II. Puerto Rico Laws Anna.; title 27, sec. 1002; 1004 (a) and (b); and, 1005 (a), (b), and (c).

2. Public Service Commission of Puerto Rico

Local P/D services are under the jurisdiction of the PSC. The PSC regulates not only surface "public carriers" but also "contract carriers"."

9

Although trucking firms are not presently required to file cost information or financial reports with the PSC, the PSC may require that common and contract trucking firms establish and maintain an exact, detailed, and continuing inventory of all useful property and to keep current accounts and records showing the original cost of such physical property. Furthermore, even though the PSC does not presently require trucking rates to be filed with the PSC and exercises only limited control over such rates, the powers of the PSC over rates, charges, and practices are broad. The PSC has power, for example, to approve all new surface rates and to prescribe fair and reasonable rates for surface common carriers. In the case of surface contract carriers, if any minimum rate is incompatible with the public interest and offers advantages or undue preference to such contract carriers, the PSC may prescribe such fair and reasonable minimum rates as it may deem necessary or desirable.10 Moreover, if the PSC determines after a hearing that any rate collected or any practice put into effect by any surface common or contract trucking firm is unfair, unreasonable or establishes unfair or undue preference, or that the rate collected exceeds the rate which is filed, published, and effective at the time the service was rendered, it may order the surface common or contract carrier to pay the aggrieved party within a reasonable time for the damages sustained because of the unfair, unreasonable or unlawful practice or rate.11

The PSC Act of 1917 did not provide for the regulation of motor vehicle contract carriers. This type of carrier came under the jurisdiction of the PSC by the Act of 1962. (Puerto Rico Laws Anna.; title 27, Sec. 1002(n). Contract carriers were defined as including: "Any person, except public carriers, engaged for pay under individual contract or agreement, in the transportation of passengers or property in motor vehicles or watercraft between points in Puerto Rico even when said transportation is carried out incidentally to the operation of any other business or activity whether or not for profit."

8 Id. Sec. 1102.

Id. Sec. 1003.

10 Id. Sec. 1104 (a) and (b).

11 The PSC has certification authority over motor carriers. It may also establish standards for service and determine the equipment to be used by surface common carriers; and also may require these carriers to make all

3. Survey by FMC and PSC

At the outset of the Puerto Rican-Virgin Island trade study, an FMC survey of Puerto Rico's transportation system, conducted by means of about 2,400 questionnaires, revealed numerous P/D transportation problems which may have adversely affected the southbound flow of U.S. domestic commerce. Because P/D problems often increase the cost of through sea and land cargo movements and inflate price levels, the FMC, therefore, arranged with the PSC to conduct a joint survey of the Island's trucking industry with the intent of improving Puerto Rico's overall transportation system. (Details of this survey and its findings comprise section C of this chapter.) The FMC and PSC trucking survey was conducted as follows. First, a survey of the principal FMC-regulated containership operators was conducted by an FMC official in Puerto Rico in order to obtain comments regarding insular P/D services and corresponding rate levels.12 Second, eight field investigators furnished by the Commonwealth conducted a broad survey of Puerto Rico's large, medium, and small trucking firms; 13 and one-truck operators to ascertain the present nature and description of the Island's trucking industry, its rates, practices, quality of service, and the effect of competition on trucking services. The integration and analysis of data developed by these surveys was done principally by the FMC in Washington, D.C. Finally, a survey of Puerto Rico's industries was conducted by means of questionnaires and personal interviews in order to collect comments regarding the rate levels and quality of service of local trucking firms, both public carriers and contract carriers. The industries selected for examination were drawn from a list taken from the Puerto Rico Department of Labor, Census of Manufacturing Industries in Puerto Rico. It named 2,408 manufacturers including 1,600 EDA-sponsored firms, which were operating in 1968. Of these 2,408 manufacturers, approximately 160 firms (a 6.6 percent sample distributed geographically throughout the Island) were

such repairs, changes, alterations, additions, extensions and improvements on and about their equipment and service as may be reasonably necessary and proper for the safety, comfort, convenience and service of their patrons and employees. It also has power to require from public carriers insurance policies, or copies thereof, or that they act as self-insurers. It has the same authority in relation to contract carriers' operations, except that it may not require them to carry out improvements or extensions to the service or to decrease their properties. (Id. Sec. 1105 (a), (b), and (c).

12 In February 1968, Paul Gonzalez, Chief, Branch of Trade Studies and Special Projects, FMC, visited the San Juan offices of Sea-Land, TMT, SACAL, GPRL, and Berwind.

13 For a description of large, medium, and small trucking firms, section C of this chapter.

see

1. Commodities Carried by Containership Operators

Appendix C, table 2 contains a list of the principal moving commodities from the U.S. mainland to Puerto Rico. These commodities include automobiles, machinery, trucks, fruits and vegetables, canned foods, fresh meat and poultry, refrigerators, electrical equipment, and footwear. Most of this traffic is transported in trailerload quantities by Sea-Land, TTT, Seatrain, TMT, SACAL, and GPRL to the port of San Juan and then moved from shipside to inland points of destination by truck. Sea-Land also offers direct-call service to Ponce and Mayagüez. The most important containerized cargoes, in terms of the freight revenues produced, are machinery and parts, canned fruits and vegetables, dry goods, feed and feedstuffs, electrical equipment, paperboard, boxes and cartons, household goods, and furniture.

2. Containership P/D Traffic and

Distribution Patterns

Sea-Land, as already noted, offers a door-to-door service which includes ocean transportation between

14 A card file of names and addresses of the 2,408 firms was prepared from the publication. A sample was drawn from the card file and organized into three major geographic regions identified by the Puerto Rico Planning Board in 1959. This was done in order to compare 1968 data with a 1960 trucking study conducted by Robert R. Nathan Associates, Inc., Consulting Economists. The regional breakdown included San Juan, Outer Metropolitan area of San Juan, Northern Region, Ponce, Southern Region (excluding Ponce), Mayagüez, and Western Region (excluding Mayagüez). For each of the areas, except San Juan, Ponce and Mayagüez, the card file was sub. divided by selected towns and filed in alphabetical order by geographic region and category of business (i.e., textiles, leather, yarn, food, etc.).

U.S. North Atlantic, South Atlantic, and West Coast ports to and from Puerto Rico and the pickup and delivery of cargo between its terminals at San Juan, Ponce, and Mayagüez on the one hand and the consignee/shipper places of business on the other hand. This carrier's service also provides a port-to-port service under which its customers pickup or deliver their own cargoes at the carrier's terminal. In its door-to-door service, Sea-Land's principal truckers include: Francisco Otero, Inc., Valencia Baxt Express, Luvi Trucking, and Jose Rodriguez Coreano Co. These companies operate trucking firms on the Island and transport containers between Sea-Land's terminals and insular points.15 These truckers operate under a so-called Trailer Interchange Agreement with Sea-Land designed to govern the trucker's P/D services incidental to the water carrier's door-to-door service. The trucker is required to carry cargo insurance, vehicle insurance, a certificate of safety inspection (sec. 3.6A to 3.6C of the Trailer Interchange Agreement), and a PSC license to operate on the Island. The trucker is compensated by Sea-Land at the same rate that the water carrier assesses the shipper/consignee on both LTL traffic and TL traffic in zones 1, 1A, and 2.16 On TL traffic to zones 3, 4, 5, 6, and 7, Sea-Land pays the motor carrier a higher charge than it assesses the shipper or consignee. (This absorption by the water carrier is discussed in pt. 3.) SeaLand's pickup and delivery rates are set forth in Sea-Land's tariff FMC-No. 16. Under the terms of the agreement, the trucker provides the tractor and SeaLand leases a 35-foot container to the trucker while the cargo is moving to its destination.

In 1967 Sea-Land's southbound traffic totalled 1,221,498 short weight tons 17 destined largely for delivery to consignees located in San Juan, Ponce, Mayagüez, and Arecibo.

15 Sea-Land places inbound containers in the marshalling yard of the terminal. From this place of rest, truckers pickup a TL trailer or LTL cargo and transport it inland. Outbound cargo is brought to the terminal from its inland origins, placed in the terminal, and from the place of rest, Sea-Land takes over to load the full container on a vessel or to stow LTL cargo in containers for subsequent loading on a vessel. The truckers furnish only tractors for hauling Sea-Land trailers or trucks for hauling LTL cargo. They furnish no labor for loading or unloading full trailerload cargo, although they do load and unload LTL cargo at a place of rest in the terminal.

16 Most tariffs have established eight pickup and delivery zones (zones 1, 1A, 2, 3, 4, 5, 6, and 7) incidental to the carrier's door-to-door type delivery. The zones and rates applicable to each zone were established by the water carrier after negotiations with members of the trucking industry. These zones cover the Island and apply separately for TL and LTL shipments.

17 Letter of R. L. Dausend, Director of Industrial and Regulatory Affairs, Sea-Land Service, Inc., June 4, 1968 to Leroy F. Fuller, Director, Bureau of Domestic Regulation, FMC, p. 1 and enclosure.

Of the 1,221,498 tons transported to Puerto Rico, 1,001,550 tons consisted of containerized general cargo deposited at San Juan (Puerto Nuevo), representing an

increase of 34 percent over the 75,000 tons handled at this facility three years earlier. This traffic was distributed from San Juan as follows:

DESTINATION

To places in San Juan and vicinity

To places in Ponce area

To places in Mayagüez area

Total

1 R. L. Dausend, op cit., p. 1 and enclosure

Approximately 700,000 tons moved in trailerload quantities, often in 45,000 pound loads to large companies including EDA-sponsored factories, food retailers, and other receivers located mainly in San Juan. The remainder, or about 300,000 tons of LTL traffic, moved mainly to smaller consignees on the Island. Most of Sea-Land's traffic, or approximately 75 percent of the TL cargo and 85 percent of LTL traffic, was picked up by local truck operators negotiating directly with the Puerto Rican consignee rather than Sea-Land. These truckers call at Puerto Nuevo berth for TL pickups and shed D or the Buchanan LTL terminal for LTL traffic.

Unlike Sea-Land, TMT operates its own trucking subsidiary, Trans-Caribbean Motor Transport. This subsidiary hauls approximately 75 percent of TMT's traffic; 25 percent is moved by other truckers used by the shippers/consignees to supplement the servcies of the carrier's subsidiary. Trucking firms generally employed by shippers/consignees are: Hector Ortega, Luis F. Bengoa, Victor G. Tort, and Carlos Rivera. These firms are used mainly for long haul traffic to Ponce, and Mayagüez. In 1967, this carrier's southbound traffic amounted to 81,495 short tons of cargo, 75 percent of which was consigned to points in San Juan. All of this traffic was landed at its San Juan terminal. The following percentages indicate TMT's relative distribution of the 81,495 tons handled through the port of San Juan in 1967.

3. The Pickup and Delivery Rates of Containership Operators

The water carrier's P/D service in Puerto Rico is a transportation service which must be included in the tariffs of each carrier subject to FMC regulation. SeaLand, Seatrain, GPRL, TTT, and SACAL file tariffs with the FMC which include rates, charges, rules, and regulations applicable to their P/D service transportation of cargo within Puerto Rico, while TMT has not filed P/D service rates with the FMC.

All San Juan operations of TMT including inland trucking or marine operations are handled by Transcaribbean Motor Freight, Inc. (Trans-caribbean), a wholly owned subsidiary of TMT. The records on all Trans-caribbean operations, which are kept by TMT, are consolidated with TMT's financial G05 report to the FMC. As of December 1969, on TL traffic moving through San Juan, a TL shipment weighing 45,000 pounds consigned to consumers located in San Juan proper (zone 1) is assessed a flat $30 charge; to Río Piedras (zone 1A), $35; to Bayamón (zone 2), $40; to Caguas (zone 3), $45; to Toa Baja (zone 4), $50; to either Manatí (zone 5), Barceloneta (zone 6) or Arecibo (zone 7), $50 (chart VII-1). Although there is an apparent escalating P/D service charge scale on TL shipments with the charge increasing with distance between zone 1 and 4 from the carrier's terminal, approximately 90 percent of the Island's area (covered by zones 3, 4, 5, 6, and 7) is charged the $45 or $50 delivery or pickup rate. The lower charges, $30 to