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tioned were the poor
condition of roads and

poor maintenance, in adequate bridges, too few and too narrow roads, unlimited access to principal highways, congestion on highway 2 (Puerto Rico No. 2 in the Puerto Nuevo area), and extremely poor condition of access road (Puerto Nuevo-Navy Road).

however, is by nature a relatively high-cost mode of transport and can be considered an alternative to ocean carriage only over a rather narrow range, generally that of high value or perishable commodities such as bread, vegetables, and frozen foods where delivery time is an important factor.98 This range, however, may widen when the Boeing 747 jumbo jet is introduced into the trade 99 and as time becomes a critical factor in more and more operations. In 1967, therefore, air cargo amounted to only 1.4 percent of the total dry cargo moving between the U.S. mainland and Puerto Rico.

2. Traffic

5. Highway Development

The Commonwealth is developing a specific plan for meeting these deficiencies in the highway system. The cost of eliminating this backlog of deficiences is estimated to be some $735.3 million.95 A four-stage con. struction program running from 1968 to 1985 has been recommended for the San Juan area. In addition, the

96 Commonwealth has launched a program intended to correct the deficiencies noted in the bridge structures of the Island. This work is now in progress. Work is also in progress on the San Juan-Ponce intercity link.97 The San Juan to Caguas section of this link has been completed and the remaining sections are expected to be completed by 1975. Such a link is also under construction between Ponce and Mayagüez and between San Juan and Mayagüez. The Mayagüez-Ponce link as well as the San Juan-Mayagüez link will be completed by 1975. These roads are expected to be adequate through 1985.

The Highway Needs and Finances Study and other transportation studies recently completed show that present highway needs of the Island will require an approximate investment of $2 billion which will call for a substantially revised plan and greater effort on the part of the Puerto Rico Highway Authority. As of December 31, 1967, the Authority's plans consisted of a program of 1,708 miles costing $164 million, a Municipal Highway Program project covering 255 miles costing $28 million, and a Reconstruction Program project covering 700 miles costing $26 million.

In 1969, six air cargo operators were in service between Puerto Rico and the U.S. mainland. These were Pan American World Airways, Eastern Airlines, Airlift International, Inc. (formerly Riddle Airlines), Delta Airlines, Transcaribbean Airways, and Southern Air Transport. The major air routes are between New York and San Juan, and between Miami and San Juan. The New York-San Juan air route is one of the most densely traveled in the world. (Its fare per passenger mile is the lowest of any air route, except perhaps the shuttle between Moscow and Leningrad.) 3

Air cargo has grown rapidly over the last decade. As shown in table III-3 below, the total growth in cargo weight for the scheduled domestic air carriers was approximately 284 percent for the past 10-year period. This growth involved an increase from 14,370 tons in 1958 to 55,146 tons in 1967.

During this decade, the dominance of Airlift International, Inc. and Pan American has gradually been eroded. Although they still account for nearly 70 per. cent of air cargo by weight, there are now other car. riers with a substantial part of the market. Table III-4 below shows the relative share of the market enjoyed by these scheduled air carriers in 1958 and 1967. respectively.

D. PUERTO RICO AIR TRAFFIC

1. General

Air freight is the only alternative transportation between Puerto Rico and the U.S. mainland. Air freight,

$5 Excluding the access roads to Old San Juan and Isla Grande.

6 Wilbur Smith & Associates, Interim Report of Needs and Finances for The Commonwealth Highway System Puerto Rico, op. cit., p. 7-4. The construction program initially proposed by the Highway Authority of Puerto Rico for the first 10 years of its 20-year plan comprised 2,875 miles of highway: only half of which was built.

97 Wilbur Smith & Associates, Padilla and Gracia, op. cit., 5-2.

As On a trip from Europe to the Caribbean, air shipment of a machine can gain from 2 to 4 weeks of production on the equipment involved.

99 A 115.passenger Super DC-9 can carry 12,000 pounds in its holds. By comparison, the capacity of the Boeing 747 jet freighter is over 200,000 pounds.

1 During a recent strike of east coast longshoremen, Pueblo and Grand Union supermarkets arranged to have some items that normally move by water carrier flown in instead.

2 Except for Southern Air Transport, which operated as a supplemental air carrier only, all other carriers were regularly scheduled lines. On May 1, 1969, Caribbean-Atlantic Airline, Inc. began operating between San Juan and Miami, transporting small amounts of air freight between these points.

3 H. C. Barton, External Economic and Social Linkages (Washington: Howard University Law School, Mar. 8-9, 1968), pp. 2–3.

TABLE III-3
Scheduled Domestic Air Cargo Carriers U.S.-Puerto Rico Growth
Indices, 1958–67
(Based on weight carried)

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TABLE III-4
Scheduled Domestic Air Cargo Carriers U.S.-Puerto Rico Market
Share 1958 and 1967
(Based on total cargo weight carried)

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Puerto Rico International Airport in San Juan, which handles the bulk of cargo and passenger traffic, is only 13 years old. Lying at an average altitude of 9 feet above sea level, its runway is some 10,000 feet long. * About 3.4 million passengers a year arrive or depart from this airport. A second runway is being constructed south of the one now in use. This one will be 8,000 feet long and will be completed by 1970. This facility represents an investment of over $36 million. New construction, including the new runway, is planned for the next 12-15 years at an estimated cost of some $30 million. These new projects include a $450,000 expansion of the main cargo area, a new access road to the cargo

area, and 40,000 square feet of new floor space in the cargo building. The improvements to cargo-handling facilities total over $1,640,000.0

The Puerto Rico Ports Authority also plans another international airport to be built later in the Lajas Valley area of southwest Puerto Rico.

In addition, airports in Ponce, Mayagüez, and Vieques also handled air cargo in July 1968." It is not known how much of this cargo represented traffic with the Mainland.

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4. Competition

Air cargo, for the foreseeable future, will be generally restricted to high-value cargo or cargo with critical

* Local aeronautical chart: San Juan local. U.S. Department of Commerce, Environmental Science Services Administration. Coast and Geodetic Survey. Revised October, 1966.

5 San Juan Star, Sept. 6, 1968, pp. 38-39.

6 San Juan Sear, op. cit., p. 6.

i Office of Economic Research, Statistical Report, July 1968 (San Juan : Puerto Rico Ports Authority, 1968), pp. 6-9.

Recommendation

It is recommended that the FMC continue to encourage fair competition and utilization of new and efficient vessels in this trade.

2. Conclusion

time requirements. As indicated previously, just over 55,000 tons of air cargo comprising only 1.4 percent of all dry cargo moved in both directions between Puerto Rico and the U.S. mainland in 1967. Since most vessels used in the Puerto Rican trade can carry at least 5,000 tons of cargo at any one time and the largest can carry in excess of 14,000 tons, it is obvious that air carriers will not be competing with ocean carriers for bulky cargo of low or moderate value. As the new jumbo jets come into service, however, it will be feasible to move an ever-increasing number of commodities by air. An example of this type of movement, which has already occurred, is the air carriage of quality fresh meats between the producer in an inland meat-processing area and the consumers on the east coast and in Hawaii.' Ocean carriers find the high-rated, high-value cargo to be most attractive for obvious reasons. Be. cause competition between air and ocean carriage involves precisely this highly attractive cargo, it is of more interest than would be indicated by the tonnages or revenues involved. Competition by air carriers, in many cases, will serve to set an upper limit to the rates which can be charged on such cargo by ocean carriers.

The principle of open and free competition has in the past been an important factor contributing to the development of containerization and the dramatic improvement in ocean carrier services in the United States. Puerto Rican trade. Transportation conditions in this trade, however, have changed radically during recent years and these changes are continuing. Under the new patterns of transportation involving huge capital investments in both vessels and shore facilities, it may well be that some regulation over entry to and exit from the trade would be in the public interest.

Recommendation

It is recommended that the Commission undertake an analysis to determine whether present conditions in the Puerto Rican trade require regulatory control over the entry or exit of common carriers in the trade.

3. Conclusion

E. CONCLUSIONS AND RECOMMENDATIONS

1. Conclusion

Unregulated carrier services in the Puerto Rican trade apparently have had no adverse competitive effect on common carriage transport in this trade. These carriers provide a valuable service in moving certain car. goes which containership operators cannot carry. No complaints have been received from either common carriers or shippers concerning the unregulated carriers in the Puerto Rican trade.

Recommendation

The containership services in the Puerto Rican trade have been highly competitive since the demise of the two conferences which served this trade during the 1950's and early 1960's. Within the 1960–68 period, most containership operators modernized their equipment, established aggressive operations and efficient services, and improved terminal facilities. These competitive services have been beneficial not only for new U.S. mainland business relocating to Puerto Rico but also for rate structures to the Island. Open competition existing in this trade, thus, has been a factor in producing generally satisfactory services, technological advances, and reasonably efficient patterns of service from certain regions.

It is recommended that the FMC continue to maintain surveillance over unregulated carriers to insure that these carriers are not operating as common carriers subject to FMC regulation on that basis.

4. Conclusion

Puerto Rico Ports Authority, Office of Economic Research, 1968. 9 The container revolution in air freight is already underway. In 1966, the domestic airborne industry adopted four container sizes (type A of 370-500 cubic feet, type B holding 195 cubic feet, type C of 125 cubic feet, and type D of 62.5 cubic feet) made of plastic and aluminum. These expendable containers are designed as one-way arrangements but more permanent containers are being developed.

Projected traffic indicates that demand for various common carrier containership services will greatly increase by 1975. This demand for ocean transportation, which is a function of growth in population, production, and incomes, will not only require larger and faster containerships but also more efficient modes of transport to keep rates at reasonable levels.

Recommendation

riers must deal with practical financial and operating problems.

To meet the growth in traffic, it is recommended that carriers by water consider the introduction into the Puerto Rican trade of larger and faster containerships capable of operating at high speeds.

6. Conclusion

5. Conclusion

Lykes and GPRL provide breakbulk service primarily with relatively obsolete vessels of World War II vintage. These carriers should consider replacing obsolete ships with vessels of modern construction. Further, these carriers should consider expanding containership service to offset the rising costs of stevedoring and other operations in the U.S. Gulf-Puerto Rican trade. Unless the slow breakbulk vessels with large crews and relatively outmoded cargo handling equipment are replaced with more efficient vessels and/or patterns of service, it appears that general rate increases may follow each significant increase in wages or other cost of transportation.

These is a close inter-relationship between U.S. mainland-Puerto Rican maritime traffic and Puerto Rico's road/highway development. As indicated previously, total common carrier traffic moving from the Mainland will greatly increase by 1975. Accordingly, there is an urgent need for further improvement in Puerto Rico's road and highway system to accommodate the orderly and efficient flow of traffic to consumers on the Island. Although the Commonwealth has considerably improved the Island's road and highway system, various defects still impede the efficient move. ment of traffic within and between metropolitan areas. A betterment in the road and highway system should reduce the time and cost of moving containerized mari. time traffic overland from the port of San Juan to Ponce, Mayagüez, and other main trading centers.

Recommendation

Lykes and GPRL should consider the feasibility of (1) early replacement of certain obsolete vessels with those of modern construction, and (2) increasing containership service in the Gulf-Puerto Rican trade. It is recognized, of course, that in any such program the car

Recommendation

It is recommended that the Commission suggest to the Commonwealth of Puerto Rico (Highway Author: ity) improving highways and roads to facilitate the large scale intercity movement of cargoes in 35 and 40 foot trailers, particularly between San Juan and principal trading centers on the Island,

CHAPTER IV

OCEAN FREIGHT RATES, CHARGES, AND PRACTICES IN THE PUERTO RICAN TRADE

A. GENERAL

1. Introduction

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This chapter examines southbound ocean rates 1 from selected ports in the U.S. North Atlantic, South Atlantic, Gulf, and West Coast regions to Puerto Rico. This analysis involves rates primarily of Sea-Land because of its dominant position in the trade ? and focuses on southbound ocean rates because of the predominant amount of traffic flowing in that direction. Examination is made of the historical development of ocean rates over the past 8 years 3 and the effect of these rates on the transportation system and economy of Puerto Rico. Terminal rates and pickup and delivery rates are cov. ered in chapters VI and VII respectively. Whenever possible, the discussion of rates follows the regional approach.

Extensive rate histories and studies of rate differentials between carriers, between commodities, and between regions are presented. Special attention is focused on the principal moving commodities and corresponding ocean rates which generate about 50 percent of the

total revenues earned by each common carrier operating from U.S. mainland ports to Puerto Rico.

Appendix C, table 2 contains a complete list of these principal moving commodities by region, and appendix E (tables 1 through 10) contains the ocean rates on these commodities. Although consideration of principal moving commodities is stressed, the southbound consumer goods and intermediate goods of primary impor. tance to the economy of Puerto Rico identified for the staff by the Commonwealth (app. B) are also analyzed, and appendix E (tables 2, 8, and 10) is an examination of ocean rates for these commodities.

Because most of the traffic is transported in trailerload (TL) quantities, these rate studies stress TL rates.* Less-than-trailerload (LTL), any quantity (AQ), freight all kinds (FAK), maximum per container and flat container rates without regard to the weight or measurement are also discussed in this chapter. As the terms clearly imply, when the quantity of a shipment substantially fills the cargo carrying capacity of the container or trailer used, it is generally considered a TL shipment and when the quantity is substantially below the cargo carrying capacity of the container or trailer, it is considered an LTL shipment." (The specific

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1 Ocean rates in this chapter refer to ocean freight rates per 100 pounds or per cubic foot (per. cu. ft.) applicable from U.S. mainland terminals (place of rest) to the end of ship's tackle at Puerto Rican ports, unless otherwise noted. For definitions of terms and abbreviations, refer to Appendix F.

? As noted in the preceding chapter, Sea-Land not only carries 60 percent of the total common carrier traffic but also is the only common carrier serving more than one region (i.e., the North Atlantic, South Atlantic, and West Coast). This carrier transports about twothirds of all common carrier traffic from the North Atlantic, more than one-half of the traffic from the South Atlantic, and all of the traffic from the West Coast.

* The period generally covered by the rate histories is that between Sept. 1, 1960 and June 1, 1968.

* Commodity rates are rates that are published to apply on a specific com. modity or a group of specified commodities. Generally, tariffs containing commodity rates name the specific commodity on which such rates apply in the same section or item that names the rate. In some cases, however, these tariff items may refer to other sections of the tariff for a list of the commodities on which the rates apply (e.g., fruits, vegetables, and groceries).

5 Hawkins Publishing Co., Hawkins Index-Digest-Analysis of Decisions under the Interstate Commerce Act, Vol. 3 (Washington: Revised through January, 1968), Item 1000-1, pp. 14, 29, 30.

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