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C. AIR CARRIERS

1. General

mix in the future and attract increasing amounts of business in general cargo.

"K" Lines service is monthly, generally between San Francisco and St. Thomas with only occasional calls at St. Croix. Vessels call at the East Asiatic Co. Termi. nal in St. Thomas. This service is part of a South America, Central America, and Caribbean Service which employs only one ship at any one time. In May 1969, the Chile Maru was in this service. The Chile Maru, a 8,352 gross ton (10,722 dwt.), 15 knot flushdeck ship, was built in 1957.

3. Inter-Island Water Services

A number of smaller craft are engaged in transporting commodities from the Commonwealth of Puerto Rico to the Virgin Islands. Several sloops in this trade are registered in the neighboring British islands. Approximately 20 schooners, which ply the Virgin Islands, the Dominican Republic, Haiti, and the Windward Islands trades, dock alongside the wharf space between piers 3 and 5 in Old San Juan. These schooners, each of 40 to 50 tons, transport Puerto Rican agricultural products, building materials, foodstuffs, and manufactured goods from Puerto Rico and the Virgin Islands to adjacent Caribbean islands, returning with agricultural products and cement. In addition, the St. John Corp. provides passenger and freight service between St. Thomas and St. John several times daily. Several motor launches make daily trips between the British island of Tortola and St. Thomas accepting passengers and freight. Finally, Caribe Shipping Co., Inc., offers freight service from Puerto Rico to the Virgin Islands.

Air carriers provide the only alternate means of transportation between the U.S. mainland or Puerto Rico and the Virgin Islands. Air freight, however, is inherently a relatively expensive means of transport and is, thus, usually limited to a rather restricted range of commodities in most categories of trade. Due to the somewhat unique position which the Virgin Islands enjoys in its trade with the U.S. mainland and Puerto Rico, air carriers, like the water carriers, also tend to provide specialized transportation sevices to the Islands. Commodities which are not usually transported by air due to their bulk and weight are nevertheless transported in considerable quantity by air carriers along with the items of high value and perishability where the delivery time and relatively higher margin of security in delivery are the overriding considerations in their shipment. Thus, in sharp contrast with the 1.4 percent transported by air carriers in the U.S.-Puerto Rican trade in 1968, Virgin Islands' air carriers transported about 5 percent of the total U.S. mainland-Virgin Islands traffic in the same year. In recent years, air carriers have shown a significant increase in traffic relative to the amount transported by water carriers.

4. Principal of Free Entry

Entry into the Virgin Islands trade is open to any U.S. citizen, corporate body, foreign citizen, or foreign corporate body who is willing to float a suitable vessel or barge and operate it under common or contract carriage. This principle of free entry and exit is important to the present state of the Virgin Islands economic development. The Virgin Islands' business concerns have traditionally relied heavily on the transportation services which have been offered in this trade and the suitable manner in which the carriers generally have fulfilled the Islands' needs for basic foodstuffs and semimanufactured goods. This transportation principle, therefore, has been beneficial to the economic welfare of the Islands.

2. Traffic

In 1968, the volume of air cargo flown into the Virgin Islands totaled about 14,300 tons, an increase of 43.3 percent over the 10,000 tons of a year earlier.14 This cargo was processed through the Alexander Hamilton and Harry S. Truman Airports. The airlines active in this service were: Pan American World Airways (Pan American), with direct flights to St. Thomas and St. Croix, Caribbean Airlines (Caribbean), Airlift International, Inc. (Airlift), and LIAT (a subsidiary of British West Indies Airlines). Pan American hauled by far the largest percentage of the cargo on direct flights. Caribbean enjoyed the second largest share, since cargo from Eastern Airlines, Trans-Caribbean Airways, Delta, and Air France Cargo is transshipped from San Juan via Caribbean to the U.S. Virgin Islands.

When air carriers inaugurated service to the Virgin Islands, their services were primarily restricted to the transport of frozen meats, fresh fruits and vegetables, between San Juan and St. Croix and St. Thomas, V.I. This was due to the fact that in May 1967, Caribbean allegedly discontinued all cargo services to the local market, the result being the necessary utilization of charter flights, thus resulting in poor and irregular air freight service to the Virgin Islands.

14 This traffic includes the air taxi traffic shipped from Ponce and Mayagüez airports.

dairy products, consumer nondurables and the like. Today, however, air freight includes such durable items as cans, trucks, bulldozers, engines, heavy construction materials, and other such unlikely commodities. Air cargo from the Virgin Islands, approximately 10 percent of total imports, typically consists of manufactured products for U.S. markets such as textiles, watch movements, pants, thermometers, resort apparel, and foreign cars.

In May 1968, the Virgin Islands government sup. ported the petition to the Civil Aeronautics Board of Airlift, an all-cargo carrier, to engage in the transportation of property and mail on an unrestricted basis

D. CONCLUSION

1. Conclusion

The conclusions reached in part I, chapter III with respect to transportation services are generally applicable to the Virgin Islands trade.

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CHAPTER III

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OCEAN FREIGHT RATES BETWEEN U.S. MAINLAND AND THE VIRGIN ISLANDS

A. OCEAN RATES

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This chapter examines the port-to-port ocean rates of Alcoa, Florida Inter-Island and Atlantic (a foreignflag operator) on traffic moving from U.S. Atlantic ports direct to St. Thomas, V.I. The chapter also compares the combined Sea-Land/Berwind New York via San Juan to St. Thomas rates 1 with those of Atlantic from New York to the same port of destination. The rate structures of Aloca, Atlantic, and Florida InterIsland may be considered representative of the general rate levels applicable on traffic moving from U.S. main. land points of origin to points of destination in the Virgin Islands by water carrier. The examination stresses southbound ocean rate levels because the predominant amount of waterborne traffic moves in that direction. The examination also gives special attention to rates affecting principal moving commodities as well as rates affecting commodities of extreme importance to the Government of the Virgin Islands. The historical changes in these ocean rates over the past 8 years and their probable affect on price levels are analyzed.

the Virgin Islands via San Juan have remained substantially the same or declined during the same period, reflecting the impact of containerization and new rate structures on traffic moving in this trade. Appendix E, table 11, shows 27 Sea-Land/Berwind TL rates applicable on principal moving commodities from Elizabeth, N.J. to St. Thomas via San Juan for December 19, 1961 and July 1, 1969. Of the 27 items shown, the rates on 24 items, or 89 percent, remained the same or declined during the 8-year period; two remained unchanged; and 22 declined from 1 to 50 percent. The largest rate decreases, 50 and 47 percent, were on iron and steel bars and iron and steel rods, respectively. Other rate decreases were on automobiles, 15 percent; bakery products, 23 percent; flour, 18 percent; evaporated milk, 22 percent; dry milk, 7 percent; beer, 22 percent; telecommunications apparatus, 7 percent; beef and veal, 26 percent; poultry, 29 percent; stoves, 24 percent; refrigerators, 10 percent; various iron and steel items, 1 to 5 percent; lumber, 4 percent; galvanized roofing, 14 percent; plywood, 4 percent; and builder's woodwork (millwork), 7 percent. The largest rate increase, 8 percent, was on trucks. These SeaLand/Berwind rates affected a substantial amount of the total U.S. mainland-Virgin Island Traffic, or ap

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Unlike the substantial rate increases which have occurred in most foreign trade routes over the past decade, domestic ocean freight rates from New York to

New York to San Juan (Puerto Nuevo) plus landing and drayage charges at San Juan were added to Berwind's corresponding line haul rate from San Juan to St. Thomas.

2 Sea-Land Service, Inc. (Pan Atlantic Series) FMC-F No. 3 Outward Freight Tariff No. 2, and Bryn Mawr Corporation Series, FMC-F No. 2, Freight Tariff No. 2.

3 Only three rates increased form 1 to 8 percent.

1 The combined Sea-Land/Berwind TL rate refers to the combination of the commodity rates of the two carriers. Sea-Land's line haul rate from

375-842 O. 70 - 13

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on consumer and intermediate goods to St. Thomas are generally lower than the corresponding rates contained in Atlantic's new trailership tariff.

In addition, almost 90 percent of the Sea-Land/ Berwind rates on commodities essential to the Virgin Islands have remained the same or declined from 1 to 50 percent (app. E, table 11). On the other hand, 76 percent of Atlantic's rates direct from New York to St. Thomas increased from 1 to 100 percent during the same period (app. E, table 12). In any event, the exemption from the cabotage laws and the presence of foreign-flag carriers in this trade have not resulted in a rate structure lower than that applying between U.S. mainland and Puerto Rican ports.

2. Direct Service From Atlantic Ports to

the Virgin Islands, and Ocean Rates

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proximately 26 percent of the total 1967 traffic moving in this trade.

Appendix E, table 11, also compares the 1969 SeaLand/Berwind TL rates via San Juan to St. Thomas with the corresponding Atlantic volume rates * from New York to the same point of destination. This comparison shows that most Sea-Land/Berwind rates are substantially lower than the corresponding Atlantic rates. From New York direct to St. Thomas, for example, 76 percent of Atlantic's volume rates are from 1 to 138 percent higher than corresponding Sea-Land/ Berwind TL rates from New York to St. Thomas via San Juan. The rate differentials favoring the Sea-Land/ Berwind combination were: iron and steel bars, 138 percent, iron and steel rods, 127 percent; iron and steel plates, sheets, and galvanized roofing, each 50 percent; flour, 63 percent; iron and steel pipe and tubing, 36 percent; beer, 28 percent; stoves, 26 percent; evaporated milk, 25 percent; and automobiles, 20 percent. The largest differential favoring Atlantic's rates were: poultry, 24 percent; and beef and veal, 18 percent; two foodstuffs of extreme importance to the people of the Virgin Islands.

In several years, as already noted in chapter II, Atlantic operated a breakbulk service from Atlantic ports to the Virgin Islands. In 1968, it inaugurated containership service. In March 1969, Atlantic increased its breakbulk rates approximately 10 percent and filed a new trailership tariff, FMC-F No. 5, which also reflected the 10 percent rate increase. In contrast to SeaLand's and Berwind's TL rates, most of Atlantic's new volume rates are predominantly AQ rates which in part may explain the reason for its higher rate levels. Of the 25 Atlantic rates examined, for example, 22 are AQ rates and three are TL rates. As previously indicated, Atlantic Lines is a foreign carrier which can operate in the U.S. mainland-Virgin Islands trade because the cabotage laws impose no restrictions on the employment of foreign-flag vessels in this trade (ch. II). The absence of coastwise restrictions does not appear to offer the Virgin Islands lower rate levels stemming from the lower costs of foreign-ship operators. The assumption that the use of foreign-flag ships in U.S. domestic offshore trades would bring about lower freight rates because of the existence of an operating cost differential between American and foreign-flag ships is not supported by the current rate conditions in the U.S. mainland-Virgin Islands trade. Examination of the SeaLand/Berwind combination rates shows that these rates

This section discusses the rates of Alcoa, Atlantic, and Florida Inter-Island (app. E, table 12) which, combined, account for most of the FMC-regulated traffic moving in the Virgin Islands trade. North AtlanticVirgin Islands traffic is carried primarily by Alcoa and Atlantic most of it moving under approximately 25 to 30 tariff descriptions analyzed in the following pages. Florida Inter-Island is the principal carrier in the South Atlantic-Virgin Islands trade.

a. Alcoa's Ocean Rates From New York to St.

Thomas

As indicated previously, Alcoa provides service to St. Thomas only. The voyage covered by Alcoa's Virgin Islands tariff is only one leg of the trade route maintained by this carrier mainly to transport bauxite northbound from Paramaribo and Trinidad to Mobile and/or Canada. In contrast to Sea-Land/Berwind rates, the level of Alcoa's rate structure from New York to St. Thomas, the principal breakbulk carrier in this trade, has increased considerably between 1960 and 1969. Appendix E, table 12 contains 25 Alcoa weight or measurement rates applicable on September 1, 1960 and July 1, 1969 to commodities which the Govern. ment of the Virgin Islands considers of the utmost im. portance to the economy. This appendix shows that all

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5 Alcoa Steamship Co., FMC-F No. 5; FMC-F No. 9; and Leeward and Windward Islands and Guianas Conference FMC-F No. 8. On May 15, 1969, Alcoa filed a revised tariff (FMC-F No. 9) modeled after a breakbulk tariff which had been used by Atlantic serving the same trade. The new tariff raised rates commodities by varying amounts which are difficult to determine precisely because of the variations in the application of weight against measurement rates. The new rates, however, are generally comparable to those contained in Atlantic's container tariff.

on

* Atlantic Lines, Ltd., Freight Tariff FMC-F No. 5, various pages.

of Alcoa's 25 breakbulk rates affecting consumer goods and intermediate goods increased from 1 to 256 percent. In addition, examination of Alcoa's breakbulk rates on principal moving commodities revealed that its rates on these commodities increased substantially over the same 9 years. Appendix E, table 13 shows 28 freight rates applicable on principal moving traffic from New York to St. Thomas for September 1, 1960 and July 1, 1969. Of the 28 rates shown, 16 rose from 1 to 100 percent; eight increased from 101 to 200 percent; two climbed from 201 to 300 percent; and two jumped from 301 to 325 percent. Although Alcoa generally increased its rates in mid-1969, its rates on various basic foodstuffs and major moving commodities are lower than Atlantic's corresponding rates.

1 to 25 percent. Only two rates increased during this period. The rates on most essential commodities remained unchanged while five rates decreased from 11 to 23 percent. The rate increases affected automobiles and trucks.

Examination of Florida Inter-Island's rates on principal moving commodities also revealed a comparatively favorable rate history. Appendix E, table 14, which contains the carrier's rates from Miami to St. Thomas on 15 principal moving commodities for May 15, 1963 and July 1, 1969, indicates that 11 items or 73 percent, remained unchanged or were reduced during the 6-year period.

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3. Service From Puerto Rico to the Virgin

Islands

b. Atlantic Lines Rates From New York to the

Virgin Islands

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Although Atlantic is a containership service, its rates are predominantly AQ rates rather than TL and LTL. Appendix E, table 12 sets forth Atlantic's rates for July 12, 1962 and July 1, 1969 on commodities viewed by the Government of the Virgin Islands as essential to the Island's economy. This appendix shows 25 rates applicable on cargo moving from New York to St. Thomas by Atlantic's new roll-on/roll-off service. Of the 25 rates shown, 19 or 76 percent, increased from 1 to 287 percent over the 7-year period. The increases included six rates which rose from 1 to 50 percent, 12 which climbed from 51 to 100 percent, and 1 which increased 286 percent.

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c. Florida Inter-Island Ocean Rates From Miami

to St. Thomas

Approximately 26 percent of the total U.S. mainlandVirgin Islands traffic is transshipped at San Juan and transported to and from the Virgin Islands by Berwind's roll-on/roll-off barge service. This carrier operates between San Juan on the one hand and St. Thomas and St. Croix on the other on a twice weekly schedule. It transports most of the U.S. mainland-Virgin Islands traffic which is deposited at San Juan by containership operators for further movement to the Virgin Islands. Its 1967 traffic to the Virgin Islands was comprised largely of TL shipments.

Examination of this carrier's TL rates for December 19, 1961 and July 1, 1969 on principal moving commodities from San Juan to St. Thomas revealed that most of its rates declined substantially over the 8-year period. Appendix E, table 14 contains Berwind's TL rates on 1l principal moving items. Of the 11 rates, 10 (91 percent of the total) decreased from 1 to 52 percent. Soap and detergents, the only rate experiencing an increase, increased 4 percent.

As in the case of Berwind's rates on principal moving commodities, an examination of its rates on commodities considered by the Government of the Virgin Islands to be of primary importance to the Islands' economy revealed numerous rate reductions. Appendix E, table 15, which contains 27 TL rates for December 19, 1961 and July 1, 1969 from San Juan to St. Thomas, shows that 23 rates, or 85 percent, declined during this period and one remained unchanged. Of the 23 rates, 16 decreased from 29 to 55 percent, and seven decreased from 5 to 25 percent. Refrigerators remained un

Most of the FMC-regulated traffic moving from South Atlantic ports to the Virgin Islands is carried by Florida Inter-Island, a small breakbulk operator which also hauls a few small containers of 20-foot length, Appendix E, table 12 shows its rates from May 15, 1963 and July 1, 1969 on the commodities which the Government of the Virgin Islands considers of primary importance.? Unlike the rates of Alcoa and Atlantic, Florida InterIsland's rates from Miami to St. Thomas show a favor. able trend over these 6 years. Of the 27 rates applicable on various consumer goods and intermediate goods, 25 items or 93 percent, remained the same or declined from

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© Chester, Blackburn & Roder, Inc., Agent, FMC-F No. 1, Southbound Freight Tariff No. 1, and Atlantic Lines, Ltd., FMC-F No. 5 Trailership Freight Tariff No. 5.

* Florida Inter-Island Shipping Corp., FMC-F No. 1, Freight Tariff No. 1, various pages.

8 lbid. 9 Bryn Mawr Corp. Series FMC-F No. 2, Freight Tariff No. 2, various pages.

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