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secure important benefits through such agreements. During the existence of Puerto Rico's conference sys. tem, rates rose considerably (i.e., doubling during the 1954–60 period) while technology remained stagnant. In contrast, under open competition, the economic performance, service, and rate levels of common carriers in this trade have been much more satisfactory. Thus, as a matter of policy, the Commission has discouraged conference agreements for fixing ocean rates in the domestic offshore trades. This policy is strongly supported by the Commonwealth of Puerto Rico.

Recommendation

The staff of the Commission should continue the pol. icy of generally discouraging ratemaking conference agreements.

2. Conclusion

has been prepared only to provide the information needed to bring carriers and shippers together.

In addition, discussions with EDA officials generated a list of commodities on which that agency suggests steady or lower northbound rate levels (app. B, northbound traffic). These are: rum; vegetables, refrigerated and nonrefrigerated; 33 canned or bottled foodstuff in

. cluding dumplings (pasteles), guava paste, honey and molasses; antennas; baseballs; hairpins; carpets and rugs; cigars; drugs and medicines; finished dry goods including women's and men's underwear; electrical appliances; equipment and materials; shoes; leather goods; plastic products; toys; scrap tobacco; and copper wire. According to the EDA, rate increases on these exports would seriously inhibit Peurto Rico's commerce moving to U.S. mainland markets.

Appendix B also contains a list of products on which developmental rates may be needed by the Commonwealth in the future. These products are aluminum products, plastic pellets, nylon and other man-made fabrics, and tires. EDA is now considering an industry based on alumina. This industry will process alumina into aluminum which, in turn, will be used for the manufacture of various aluminum products including aluminumware, extrusions, sheets, etc. EDA is also considering the establishment of an industry to produce plastic pellets. Plastic producers use these pellets for producing plastic articles. Production should be underway in approximately 2 to 4 years. The Commonwealth's petrochemical industry plans production, in approximately 1975, of man-made fabrics (e.g. nylon). Finally, EDA is also considering an industry that will import rubber thread for the production of tires. These tires will satisfy some domestic demand and will also be exported to Mainland markets.

The Commission should continue its policy of encouraging developmental rates in the domestic offshore trades to assist the economic development plans of Puerto Rico.

A general inadequacy of shipping space hampers the flow of certain commerce between U.S. mainland ports and those of Puerto Rico, particularly with respect to breakbulk cargoes. One possible way to alleviate the shortage is to authorize certain American-flag subsidized lines to provide service in the domestic offshore trades.

Recommendation

It is recommended that the Commission make a study of the present and potential effect of containerization on breakbulk service in the domestic offshore trades. The objectives of the study should be (a) to evaluate the need for each type of service, in terms of present and probable future cargo volume, including whether containerization promotes shipments in different quan. tities, and (b) to consider and make recommendations concerning possible solutions to the increasing shortage of breakbulk

space.

3. Conclusions

1. CONCLUSIONS AND RECOMMENDATIONS

1. Conclusion

(a) Although the situation with respect to demur. rage has improved considerably, common carriers by water still often fail to collect demurrage and detention charges. This failure to collect such charges constitutes a violation of the act.

(b) It appears that the credit rules of most common carriers by water in the Puerto Rican trade are vague and unfair. Under some credit rules, a carrier may arbitrarily demand prepayment from one shipper while extending credit to another.

It is difficult to see how rate-fixing conference agreements can be justified by existing transportation needs in this trade or how the economy of Puerto Rico would

* For example, Yautias, plantains, melons, pumpkins, and tanniers.

Recommendations

(a) It is recommended that the Commission direct the parties to Agreement No. DC-38 to act promptly not only to establish rules and procedures which will resolve the problems of demurrage and unfair credit rules but more importantly also to enforce these rules.

(b) It is recommended that the Commission continue to evaluate credit and demurrage conditions in the domestic offshore trades (i.e. Hawaiian, Alaskan, and Puerto Rican trades).

4. Conclusion

On the basis of available evidence, it does not appear likely that the entry of foreign carriers into the U.S. mainland-Puerto Rican trade will, in the long run, result in substantial benefits to the economy of Puerto Rico. On the contrary, the analysis contained in preceding chapters and section G of this chapter (the U.S. Coastwise Laws) indicates that, in general, the economic performance, service, and rates of U.S. domestic common carriers over the past decade have been satisfactory. It is also important to note that under the present restriction against entry of foreign bottoms into the U.S. mainland-Puerto Rican trade, carriers have made large investments in ships and associated terminal facilities needed for the rapid advances in containerization which have proven to be of considerable benefit to shippers and the people of Puerto Rico. For these reasons, suggestions that the exclusion of foreign carriers from the U.S. coastwise trade results in relatively high ocean transportation charges or that entry of foreign carriers into this trade would reduce such charges are contrary to the experience in this trade. Shortages of vessel space may be relieved by other means (e.g., see conclusion and recommendation 2 of this chapter).

revenue which is in excess of the out-of-pocket expenses incurred, serves to contribute to the full costs of the entire voyage.

Developmental rates are important to Puerto Rico because of the Island's system of importing and processing raw and intermediate goods, such as leather, yarn, fabrics, electrical and electronic components, and metals; thereafter, re-exporting these goods to U.S. markets. This system of importing and exporting, in. volving double shipments and freight charges, increases the proportion that ocean transportation comprises of the total cost of finished goods. If the output can be transported to Mainland markets at low rates making Puerto Rico's commodities competitive with corresponding foreign and Mainland articles, the Island's industrial growth will be greatly assisted.

The Commonwealth indicates that the industrialization program requires relatively low export rates on certain export traffic to keep Puerto Rico's infant industry production competitive with other sources of supply on the U.S. mainland. Northbound developmental rates would appear to be of special significance for the list of commodities outlined in appendix B (northbound traffic) 34 and appendix H. Developmental rates on northbound traffic would not only benefit the economy of Puerto Rico but also the carriers. These rates could help to alleviate the existing imbalance in traffic flow and freight revenues, encourage larger investments in Puerto Rico and provide the impetus for further devel. opment of the Island's industry, and generate greater movements of southbound support cargoes. Northbound developmental rates would, therefore, appear to be of benefit to the economy, carriers, and shippers.

Recommendations

Recommendations

It is recommended that: the present policy of the United States with respect to the exclusion of foreign carriers from the domestic offshore trades be preserved.

It is recommended that:

(a) Carriers offer developmental rates on northbound traffic where such rates aid in the establishment of an infant industry and meet the other requirements of law; and,

(b) The FMC continue to utilize its good offices in bringing shippers and carriers together with respect to developmental rates and to support the basis for such rates.

5. Conclusion

The Commission encourages developmental ocean rates, which are otherwise inaccordance with law, where there are benefits to Puerto Rican infant industry and ocean carriers. As long as the vessels of common carriers frequently leave Puerto Rico relatively light, any

34 The list of commodities on which steady or lower northbound rate levels are suggested include: baseballs; hairpins; carpets and rugs; cigars, drugs or medicines; finished dry goods (including women's and men's underwear); electrical appliances, equipment and materials, shoes, leather goods, plastic products, toys, scrap tobacco, and copper wire.

375–842 0—70-12

PART 11

The Virgin Islands

Trade

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