$40, apply only to 10 percent of the Island, mainly to destinations near San Juan, Ponce, and Mayagüez (i.e., zones 1, 1A, and 2 of each city). In these metropolitan areas, as already noted, the charges assessed by the containership operators are the same as those assessed the carrier by the truckers for the trucking services performed in behalf of the containership operator. In the $45 and $50 zones (municipalities outside the metropolitan areas including zones 3, 4, 5, 6, and 7) the trucking charges generally assessed the consignee by some containership operators are $5 to $30 per trailer less than the charges which the trucker bills the water carrier for the work performed.18 It appears that this pattern was originally adopted by carriers in order to cooperate with the Commonwealth's policy of encouraging new industry to locate in areas remote from San Juan.

LTL charges, which are predicated on the basis of the weight of the shipment and the zone to which it is being delivered, generally decline with increasing quantities in three steps: shipments under 2,999 pounds, 3,000 to 5,999 pounds, 6,000 pounds and over. Table VII-1 shows that in San Juan's zone 1A, the charge for the delivery of an LTL shipment weighing less than 3,000 pounds is 85 cents per 100 pounds; a shipment weighing less than 6,000 pounds is 70 cents per 100 pounds; a shipment weighing over 6,000 pounds is 55 cents per 100 pounds. This table also shows that al

though the overall charge increases with the mileage the average per mile rate decreases. Sea-Land's LTL delivery charge to Cataño in zone 1A (1 mile), for example, is approximately 14 cents per mile, while its delivery charge to Isabella in zone 7 (67 miles) is only about 2 cents per mile. These LTL trucking charges comprise some 40 to 78 percent of the carrier's average weight rate from New York to San Juan, depending on the delivery zones involved and, for TL, the range is 4.8 to 7.9 percent of the average ocean rate. This is not to say that the LTL trucking rates in Puerto Rico are unreasonably high. These rates, however, do constitute a significant part of the overall through transportation charges on imported items moving in LTL quantities. The water carrier's LTL charge to the shipper or consignee and the amount the water carrier pays the trucker is the same.

4. Substituted P/D Services in Puerto Rico

This section examines the current practice of certain carriers indicated in their tariffs of serving the ports of Mayagüez and Ponce through the Port of San Juan, rather than by actual vessel calls at the other ports. This practice is referred to as "Substituted Service." Substituted service is employed by Sea-Land, GPRL, TTT, and Seatrain which publish rates to San Juan, Ponce, and Mayagüez. TMT and SACAL do not publish a vessel service to Ponce and Mayagüez. These carriers, therefore, do not employ substituted service and, for this reason, are not discussed in this section.

When the carrier employs substituted service to Ponce or Mayagüez, the shipper's freight charges to

CONTAINERSHIP PICKUP AND DELIVERY ZONES IN PUERTO RICO-1970

Sources: (a) Sea-Land Service, Inc., FMC-F No. 21; (b) Seatrain Lines, Inc., FMC-F No. 2;

(c) TransAmerican Trailer-Transport, FMC-F No. 1, and;

(d) Gulf-Puerto Rico Lines, Inc., FMC-F No. 1.

TABLE VII-2

destination remain the same as if the vessel had called at Ponce or Mayagüez. For example, Sea-Land's 1969 freight charge from New York to Ponce on a trailerload of beans (45,000 pounds) was 95 cents per 100 pounds. When Sea-Land deposits the trailer at San Juan and trucks it to Ponce, the shipper's ocean freight charge to Ponce remains unchanged. Because Sea-Land moves most of this traffic, this discussion centers primarily on Sea-Land's substituted service. Its overland service is typical of that provided on a lesser scale by GPRL, Seatrain, and TTT.

a. Water Carriers Providing Substituted Service In contrast to the early 1960's when the Bull Lines and containership operators provided frequent directcall service to Ponce and Mayagüez, today, four containership operators (i.e. Sea-Land, GPRL, Seatrain, and TTT), which hold themselves out for direct-call service to Ponce and Mayagüez, call at these ports infrequently, or not at all. These ports, however, are served frequently by road from San Juan. In 1969, Sea-Land provided only 8 to 12 direct service calls per year, apparently due to a lack of sufficient vessels with shipmounted cranes capable of handling containers at Ponce and Mayagüez.1o There are no shore-side cranes at Ponce and Mayagüez and the terminal's apron is very narrow. Thus, Sea-Land generally serves these

19 Sea-Land is now installing a shore-side crane at Mayagüez and an agreement to install one at Ponce is under negotiation.

ports by road from San Juan. It is 70 miles by road. from San Juan to Ponce; 110 miles from San Juan to Mayagüez. The actual trucking time from San Juan to Ponce is about 3 hours; to Mayagüez, about 4 hours. Sea-Land serves these ports by road on a daily basis. GPRL, which operates one containership and three breakbulk vessels, calls at Ponce and Mayagüez using its breakbulk vessels since its roll-on/roll-off containership, the SS New Yorker, can call at San Juan only. This carrier, therefore, moves containers to and from Ponce and Mayagüez by road. TTT, which operates the SS Ponce de Leon, a large roll-on/roll-off vessel, calls at San Juan only due to the lack of adequate terminal facilities at Ponce and Mayagüez for roll-on/roll-off operators.20

Seatrain, which operates three vessels to and from San Juan on a biweekly basis, calls at San Juan only. Sea-Land, GPRL, Seatrain, and TTT arrange for transport of cargo by truck from San Juan, where they have their principal terminals, to their terminals at Ponce. and Mayagüez. The actual trucking, as noted earlier in this chapter, is performed by local Puerto Rican truckers using tractor-trailer equipment under contract with the water carriers. The substituted service charges which are paid to the truckers by the water carrier, are absorbed by the carrier rather than by the shipper. Sea-Land's and TTT's San Juan container terminals

20 The terminal at Ponce cannot accommodate this vessel's offloading/loading ramp.

are located at Puerto Nuevo; their Ponce container terminal is located on property within the Ponce Municipal Terminal; their Mayagüez container terminal is located on property adjacent to the Mayagüez Municipal Pier (ch. VI). Seatrain's San Juan terminal is located at Isla Grande. GPRL's terminal is located at pier 11, Old San Juan (ch. VI); like Sea-Land's facil ity, their Ponce container terminal is located on property within the Ponce Municipal Terminal; their Mayagüez container terminal is located on property adjacent to the Municipal Pier.

(1) Sea-Land's Substituted Service.-Sea-Land's direct calls at Ponce and Mayagüez have been less than one per month due to its lack of vessels with shipmounted cranes capable of handling containers at these ports. In 1967, Sea-Land's direct service to Ponce moved only 14,000 tons through this terminal. Of Sea-Land's 1,001,550 tons landed at San Juan in 1967, 111,939 tons or about 11 percent of this traffic was trucked by substituted service from San Juan to Ponce; 21 approximately 26,504 tons or about 3 percent of its cargo was trucked to Mayagüez. Appendix C, table 4 shows that Sea-Land trucked 6,465 containers from San Juan to Ponce on traffic manifested to the latter port; most of this traffic consisted of TL shipments (4,585 TL containers versus 1,880 LTL containers). When this substituted service was performed at the water carrier's option, the trucking charge of $45 per loaded trailer (22.5 tons), or $2 per ton, from San Juan to the Ponce terminal was absorbed by the water carrier.

In 1967, Sea-Land's direct call service to Ponce employed either the SS Azalea City, SS Mayagüez, or SS Bienville, C-2-type vessels, which docked at San Juan to unload San Juan cargo first and which then were sent around the Island to Ponce or Mayagüez. In contrast to the 3 hours by road, the total sailing time from San Juan to Ponce is 15 hours.22 As indicated in chapter II, frequent and fast service is important to Puerto Rico's industrialization, among other things, because it not only facilitates production but also reduces inventories and the expenses involved with maintaining large inventories. The water carrier's substituted

21 The loaded container was trucked from shipside at San Juan to the car. rier's Ponce terminal where it was deposited. The trucker picked up an empty or loaded container for return to the San Juan terminal.

22 The total time between departure from San Juan and unloading at Ponce amounts to approximately 15 hours. The vessel departs from San Juan at 5 p.m., or at the end of straighttime working hours for stevedores. In order to arrive at Ponce the following day and be ready to start offloading at the start of straighttime working hours for stevedores, or 8 a.m., the vessel often varies the time of departure, speed of maneuvering in the inner and outer harbor of San Juan, and speed of advance over the 120 nautical miles distance between San Juan and Ponce and docking at Ponce to be ready for unloading at

8 a.m.

service from San Juan to Ponce, which takes less than one-half day, facilitates the fast and frequent delivery essential to stores and factories located on the southern and western regions of the Island. Sea-Land's San JuanPonce traffic is trucked between these two points on a daily basis.23 At best, these consumers could expect only weekly service if all 111,939 tons had to be moved by sea.

(2) Cost Differential (Road versus Sea) and Rate Levels. It is probable that Sea-Land has employed substituted service not only because sufficient vessels with onboard cranes are not presently available to maintain frequent direct-call service but also due to the lower cost of using motor vehicles from San Juan to Ponce and Mayagüez.

To determine the probable cost differential of substituted service relative to sending a ship from San Juan around the Island to Ponce, the Bureau of Financial Analysis of the FMC conducted a special study of costs to have a vessel call at Ponce. This study considered the number of days at sea and in port of a ship and projected the additional costs including dockage reported by Sea-Land in its 1968 G.O. 11 reports for its East Coast-Puerto Rico service. The additional costs were then distributed over an average load factor of about 2,300 tons (103 containers) per voyage assuming a weekly service.

Comparing this cost to the cost of moving one container load by road from San Juan to Ponce, the study found a cost differential favoring delivery by substituted motor service. It is important to observe, moreover, that consignees in Ponce and Mayagüez desire service more frequently than once a week in order to adequately supply consumer needs in these communities. If the costs of biweekly service were analyzed, the cost differential favoring delivery by road would be even greater. It is recognized that there are other factors of cost affecting the movement by land and sea which were not included in this study. These factors, however, were not considered significant enough to change the conclusion concerning the cost differential derived from the Bureau of Financial Analysis study. It is important to mention that the lower costs are important not only to the carrier but also to the consumer because, generally speaking, low costs of transportation are reflected in lower ocean rate structures over the long run ultimately allowing for lower pricing of imported goods and, thus, benefiting the consumer in Puerto Rico.

23 Sea-Land's containerships, which call at San Juan six times per week, generally carry traffic destined for consignees located at Ponce.

(3) Other Containership Operators.-As indicated previously, TTT and GPRL can not provide direct-call containership service at Ponce and Mayagüez. TTT's SS Ponce de Leon is incapable of making such calls as is GPRL's SS New Yorker, a small roll-on/roll-off containership. Moreover, the New Yorker's size, range, and speed permit scheduled calls at San Juan only. Seatrain's 3 vessels permit only biweekly service to San Juan. Unlike Sea-Land, these carriers therefore provide no direct-call service to Ponce and Mayagüez and serve these ports exclusively by truck from their San Juan terminals. In 1967, GPRL's Ponce container traffic amounted to approximately 1,000 tons (based on 26 SS New Yorker calls at San Juan and 2 to 3 trailers per visit). Although no precise 1967 intercity traffic information could be obtained on Seatrain's and TTT's San Juan-Ponce or Mayagüez operations, it is estimated that this traffic was relatively small compared to that of Sea-Land.24

b. Benefits to the Public

Knowledge concerning the relationship between SeaLand's substituted service and the benefits of such service to the public is of particular significance in considering whether substituted service is warranted. In this connection, the extent to which this service may be needed by the shipping public is important.

As indicated previously, the Ponce region, which contains 16 relatively small communities, is the trading and distribution center of southern Puerto Rico. In 1966, this region contained 328 industrial firms or branch plants of U.S. based companies.

The frequent supply of semi-manufactured and raw materials provided by trucks from San Juan is very important to the plants as well as to the future dispersion of manufacturing plants to this area. 25 The same is true of the Mayagüez region which serves as a trading center for 15 small communities in the western sector of the Island. Approximately 350 manufacturing plants which depend on frequent service from the Mainland are located in this area. Moreover, grocery stores in Ponce and Mayagüez depend on frequent service for prompt delivery of fresh vegetables and fruits that must be placed on the shelf on Mondays and

24 Seatrain estimates that its southbound Ponce and Mayagüez traffic was less than 5 percent of its total southbound traffic of 248,000 weight tons in 1967. 25 Only 14 percent of all manufacturing plants are located in the Ponce region.

Wednesdays of each week. As indicated previously, delivery from San Juan to Ponce and Mayagüez by road takes less than one day. In contrast, to the immediate dispersal of containers which upon offloading at San Juan move by truck to Ponce, a C-2 requires 14 hours to offload at San Juan and another 15 hours by sea between San Juan and Ponce. Further, only three C-2 Sea-Land vessels are outfitted with ship cranes which would make it possible to load and offload at Ponce. In addition, deliveries by road are made daily; whereas by sea, only weekly service would be possibleat best, and then, at a higher cost than by road. Therefore, grocery stores and the EDA-sponsored factories located in the southern and western regions of the Island appear to have benefitted by Sea-Land's practice of delivering by road. The foregoing discussion of substituted service has been largely based on economic considerations. It is recognized that there may be certain social and institutional factors which have not been considered. These include employment of some labor at Ponce and Mayagüez, excessive wear and tear of highways, and danger to private vehicle traffic.

c. Containerization and Distribution Patterns

There is another noteworthy consideration which demands attention in any examination of substituted service in this trade. The land area of Puerto Rico, being relatively small, makes the length of trucking from San Juan to Ponce, and Mayagüez insignificant when compared with the port-to-port distance between U.S. Atlantic ports and the Puerto Rican ports. These distances and relationships indicate that the principles of the new economics of containerization may lead to a higher concentration of cargo through one-load center with subsequent distribution by truck within a 200mile radius of the terminal.26 It is important to mention that the rising costs of terminal operations and the radical changes in ship design, which are now producing mammoth containerships for this trade, indicate that Ponce and Mayagüez may receive even less directcall service in the future due to their limited capability of handling such ships. The harbor, berthing, terminal, and marshalling yard conditions at Ponce and Mayagüez do not meet the specifications of a modern container facility. The benefits inherent in new patterns in containerized movements must not be restricted to con

26 McKinsey Co., Inc., Management Consultants, op. cit., p. 13.