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cranes, platform and stake trucks, and tractors, compared to 400 in 1959. Employment dropped from 400 in 1959 to 292 in 1967.

The predominance of dump trucks is characteristic of the type of business conducted. The 1959 Robert Nathan Study found that some dump truck operators carried small amounts of construction supplies not lending themselves to dumping. The materials carried included cement in bags, concrete pipe, and other building materials. Most of this cargo originated at the plants in Puerto Rico where they were produced (mainly in the Ponce and San Juan areas) and, thus, were largely intraisland movements.

(3) Carriers of Sugarcane.-In 1967, approximately 81 small truckers, or 25 percent, confined their business to the movement of sugarcane compared to 160 small truckers in 1959. The number of power units and employment declined between 1959 and 1967 from 470 power units and 350 persons employed in 1959 to 330 power units and 200 persons employed in 1967.

Most of these truckers operated on a seasonal basis only and confined all of their trucking business to the sugar harvest. Since the income from this activity was often not sufficient in itself, many operators engaged themselves in some other type of business. It is estimated that 18 percent of this group grew sugarcane

themselves. Other carriers of sugarcane engaged in other businesses during the off-season such as automobile repair shops. Still others indicated no off-season employment.

The transport of sugarcane is strictly an intraisland activity and it only affects ocean transportation indirectly through its effect on the trucking industry of Puerto Rico. Although sugar is exported from Puerto Rico, it is exported primarily in a bulk unrefined form. These small truckers are not involved in the movement of sugar from the refinery to the port area. Appendix I, table 8 shows that the seasonal effect is a relevant factor in the business operations of certain small trucking firms.

This seasonal condition is especially applicable in the case of the sugarcane industry and the manufacturing industry. In the sugarcane industry, 92 percent of the trucking business was seasonal while in the manufacturing industry almost 30 percent of the trucking was seasonal. In the mixed category, 33 percent was also seasonal. Out of a total of 325 small trucking firms, 29 percent (94 firms), operated seasonally, or principally so.

7. Description of One-Truck Operators a. Size of the Group and Distribution of

Business Trucking firms are defined as one-truck operators when they operate only one power unit. The survey disclosed an estimated 3,500 one-truck operators in Puerto Rico in 1967 (app. I, table 1).49

(1) Equipment of One-Truck Operators.Appendix I, table 1 shows that in 1967, this group operated approximately 3,530 straight trucks of various descriptions and about 90 tractor-trailer combina. tions while, in 1959, there were about 2,200 trucks operated by members of this group with no tractortrailers reported separately. This represents a 65 percent increase in power units over the past decade. Appendix I, table 1 also shows the geographical distribution of one-truck operators. Approximately the same percentage of total units were employed in Puerto Rico's northern region as were employed in 1959 (70 percent) although proportionately more of these were used in the San Juan metropolitan area in 1967. The proportion of units employed in the southern region rose from 15 to 20 percent between 1959 and 1967 reflecting the increased activity in the petro-chemical complexes located in the region, while the numbers in the western region decreased from 18 to 10 percent during the same period due to the decline in sugar production.

Although the sample reporting operation of tractortrailer units is small, it does indicate that a significant increase occurred in the number of one-truck operators who have tractor-trailers reflecting the increase in containerization and TL movements.

(2) Distribution of Business of One-Truck Operators.—Appendix I, table 6 shows the distribution of one-truck operator business in 1967.

(a) General Cargo.—The general cargo customers consisting of wholesalers, retailers, manufacturers and miscellaneous others, were served by 2,300 carriers in 1967, an increase of 350 percent over 1959. The largest subcategory of customers in this group was the wholesalers. Approximately one-third of the one-truck operators reported serving wholesalers in 1967 with numerous pickups at the carrier's ocean terminals, while

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19 The sample survey of this group resulted in 118 replies giving an effec. tive sample of 3.26 percent. All data concerning one-truck operators has been derived by projection of this sample. Although it is still not possible to determine the probable limits of error for data related to this group, it is felt that improved record keeping by one-truck operators has resulted in increased reliability of the source data used in compiling the universe of one truck operators.

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adapted to the transport of general cargo. Only about one-third, however, reported carriage of cargo other than cane.

About 650 operators carried agricultural products; cane and farm products together were carried by about 860 truckers.

two-thirds reported some carriage of general cargo. These truckers created a highly congested condition at some terminals (ch. VI).

(b) Construction. Approximately one-third of all one-truck operators reported at least some cargo carried for the construction industry during 1967. The bulk of these operators listed construction material as their single most important item of transport. Of an estimated 1,130 truckers carrying construction materials, approximately 800 were dump truck operators whose ability to compete for general cargo such as is available from ocean carriers is minimal. Thus, the onetruck operators handling imported construction materials probably accounted for only a small amount of carriage of construction cargo.

The total number of carriers of construction materials increased about 31 percent between 1959 and 1967. Dump trucks, however, increased less than 10 percent. 50

Appendix I, table 5 shows the seasonality of business of the one-truck operators. As in the case of small trucking firms, seasonality is a relevant factor in the business operations of certain one-truck operators. This is especially true in the case of the sugarcane industry where 60 percent of the trucking operations are probably primarily seasonal.51 In the mixed category 40 percent of the trucking is seasonal while 37 percent is seasonal in the trucking of farm products, 30 percent is seasonal in retailing operations and almost 20 percent is seasonal in the construction industry. Thus, out of a total of 86 firms reporting, almost 20 percent (18 firms) consider their business primarily seasonal. This further substantiates findings that seasonality has considerable influence on the trucking industry of Puerto Rico.

(c) Sugar, Sugarcane, and Agricultural Products.The number of one-truck operators engaged in the transport of either sugarcane or processed sugar declined about 70 percent between 1959 and 1967. Only about 245 are currently engaged in the sugar and cane movements. Since cane-carriers use medium-size stake and platform trucks,52 their vehicles should be well

b. Employment and Wages of One-Truck

Operators The majority of one-truck firms are owner/operator businesses in which the owner is the driver. Of the 118 firms reporting, 116 indicated a total of 120 ownerdrivers.53 An additional 25 hired drivers were reported by 25 of the firms. This represents a total of 3,680 owner/operators and 770 hired drivers for a total of 4,450. Seventeen assistant drivers were also reported. Other employees totalled 400.

Appendix I, table 7 shows the wage rates of onetruck operators. Most hired drivers and other employees work on a piece rate basis. Their pay was based on either the value or revenue units of cargo handled. Although it is not possible with available information to translate these piece work rates into a reliable hourly wage rate, it is estimated that their average wage rate is well below that of the large and medium-truck operator drivers. This lower wage rate and lower overhead plus lower equipment expenses partially explains the reason for their generally lower pickup and delivery rates.

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C. Rates and Competitive Impact of One-Truck

Operators Members of the organized trucking industry and water carriers uniformly agree that rate levels are unrealistically low, particularly in the case of small and one-truck operator firms.

At least one of the large ocean carriers reported that its contract rate with large truckers is regularly undercut by the smaller firms negotiating directly with the shipping public. On the other hand, some of the smaller truckers have alleged that the ocean carriers and large truckers are "freezing out" the smaller operator by not allowing the small truckers sufficient business to maintain adequate service. For this reason, some small truckers have indicated a desire for regulation by the PSC including equitable and effective rate regulation to afford small truckers a reasonable chance at securing customers.

60 In the Robert L. Nathan study, each operator was assigned to the category of carriage furnishing the largest part of his business and was not included in any other category. In 1967, operators were listed in all categories from which they derived more than 5 percent of their business. Since the results of both represent an estimate of the conditions applying to the universe of truckers, they are comparable.

61 It is recognized that the sample is marginal. It is logical, however, to presume from the nature of the industry that a large amount would be seasonal.

62 These trucks are generally of 242 to 10 ton size.

53 Generally speaking, brothers, sons, and other members of the immediate family were also classed as owner/operators.

D. CONCLUSIONS AND RECOMMENDATIONS

1. Conclusion

Trucking is practically the only economical means for intraisland movement of goods, with the sole exception of pipeline movement of petroleum products, a relatively recent and limited development. Efficient and economical trucking service is essential to the origination and termination of ocean transport as well as to the intraisland commerce and the furtherance of the Commonwealth's desire to decentralize industry. The current practice of providing substituted motor service to the ports of Mayagüez and Ponce by service through the Port of San Juan rather than actual vessel calls at the other ports appears to offer an efficient means of transporting this cargo. In addition, stores and factories located in the southern and western regions of the Island appear to have benefitted by this practice. However, substituted services create certain problems which require examination. One is the possible diversion of traffic which is naturally tributory to Ponce and Mayagüez. Another is the orderly development of terminal facilities at these ports. In addition, there is a deceptive appearance in water carriers' tariffs which indicates direct vessel service with accompanying time and cost factors, but which actually is based on another mode of service (trucking).

2. Conclusions

The water carriers' pickup and delivery service in Puerto Rico is a transportation service which must be included in the tariff of each carrier subject to FMC regulation. Except for TMT, all water carriers have filed their pickup and delivery service rates and charges with the FMC. It appears that TMT is providing P/D services through its wholly-owned subsidiary Trans-caribbean. Recommendation

It is recommended that the FMC maintain close surveillance over Puerto Rico's P/D service tariff filing requirements. 3. Conclusion

The predominance of one-truck operators, many of which are unregulated, makes difficult the prescription and enforcement of accounting and reporting requirements, determination of appropriate rate levels, the policing of tariff requirements, and inspection and enforcement of safety requirements. This also has contributed to inefficiency, under-utilization of equipment, and rate-cutting below economically justifiable levels. 4. Conclusion

During the course of the survey, there were numerous allegations, in addition to those concerning noncompensatory rates, of unfair rebating practices, uneconomic rate cutting for competitive purposes, illegal rate maintenance agreements, and quasicontractual arrangements between truckers and shippers which may in fact equate to trucker subsidies from shippers. If these allegations are true, they indicate that a need exists for rate regulation. The PSC should continue its attempt to establish more positive regulation over the trucking industry.

Recommendation

It is recommended that the FMC's staff maintain close surveillance over the substituted service practices of the water carriers in the Puerto Rican trade.

CHAPTER VIII

GENERAL TRANSPORTATION AND

REGULATORY MATTERS

A. GENERAL

only upon consideration of all the factors involved, particularly those related to costs of transportation. Nonetheless, it is a fact that food stores and EDA-sponsored factories in Puerto Rico pay the lowest ocean transpor. tation charges in the Caribbean region (chs. IV and V).

Because a comparative rate analysis is inconclusive, it is of special importance to the understanding of ocean transportation and carrier practices in this trade to consider, in more detail, certain factors which may af- . fect Puerto Rico's transportation system. These factors include: carrier agreements, shortage of vessel space, demurrage, credit regulations, nonvessel operating com. mon carriers (NVOCC's), developmental rates, and U.S. Coastwise Laws.

As shown in chapters IV and V, Puerto Rico has, for the past decade, been assessed relatively low ocean rates. Commodity rates between the Mainland and Puerto Rico have been maintained at a level which is considerably lower than corresponding rates on traffic transported by foreign-flag operators from the same points of origin on the Mainland to Haiti, Jamaica, and Santo Domingo or to Western Europe. As in the case of the price-transportation relationships discussed in chapter V, it is important to note, however, that such a comparison alone is not conclusive that ocean rates to Puerto Rico are reasonable. The handling costs, type of vessel employed, frequency of service, volume of traffic, and frequency of damage claims to points of desti. nation such as Haiti, Jamaica, and Santo Domingo are considerably different than those applicable to the Puerto Rican trade. For example, in 1968, the total traffic in terms of value shipped from U.S. ports to Jamaica, Dominican Republic, and Haiti amounted to only some 12, 10, and 2 percent, respectively, of the traffic handled from U.S. ports to Puerto Rico. It should be recognized that transportation is often characterized by reduced unit costs when the volume of trade increases; and, therefore, commodities moving in large volumes may be transported at a lower unit cost than can those moving in smaller volumes. A determination as to reasonableness of rates to Puerto Rico can be made

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2 Section 15 of the Act states, “That every common carrier by water, or other person subject to this Act, shall file immediately with the Commission a true copy, or, if oral, a true and complete memorandum, of every agreement with another such carrier or other person subject to this Act, or modification or cancellation thereof, to which it may be a party or conform in whole or in part, fixing or regulating transportation rates or fares; giving or receiving special rates, accommodations, or other special privileges or advantages: control. ling, regulating, preventing, or destroying competition; pooling or apportioning earnings, losses, or traffic; allotting ports or restricting or otherwise regulating the number and character of sailings between ports; limiting or regulating in any way the volume or character of freight or passenger traffic to be carried ; or in any manner providing for an exclusive preferential, or cooperative working arrangement. The term “agreement' in this section includes under. standings, conferences, and other arrangements."

? The provisions of the Shipping Act, 1916, which are administered by the FMC, require every common carrier by water in the domestic offshore trade to establish, observe, and enforce just and reasonable rates.

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