« SebelumnyaLanjutkan »
FREIGHT RATE STRUCTURE: DIFFERENTIALS-TL TRAFFIC
SOURCE: APPENDIX D, TABLES 1, 3 AND 4.
COMPARISON OF SEA-LAND SERVICE INC'S RATES ON TRAILERLOAD SHIPMENTS TO THE CORRESPONDING RATES OF TMT TRAILER FERRY, INC. AND GULF-PUERTO RICO LINES INC. FROM U.S. MAINLAND PORTS TO SAN JUAN, PUERTO
JUNE 1, 1968
CENTS PER 100 LBS.
CANNED/BT TL'D GOODS,NOS
OIL, SALAD & VEG
ACIDS NOS, HAZ
ACIDS NOS, NON-HAZ
AGRL IMPLEMENTS, HAND
HAND BCX/PAPER BOARD
CURED HIDES O
YARN, SYNTHE TICO
EGGS (per coses) 630 case s
FISH FRZN. FLOUR,BULK
FLOUR PREPARED, BOXED
PACKING HSE. PRODS,NOS
PACKING HSE. PROD, PORK, CURED
RICE,MILLED, CLOTH BAGS
RICE, INNER CONTAINERS
40m 38m 36m 40m 36m
NOTE : FOR FULL DESCRIPTIONS, SEE APPENDIX E, TABLE 10.
As previously indicated, Sea-Land and GPRL are operating subsidiaries of McLean Industries and dominate traffic from regions served by these carriers. These carriers are largely administered through Sea-Land's Elizabeth headquarters where, for the most part, SeaLand's and GPRL's operating statistics and other records are processed and maintained. Chart IV-14 shows that GPRL rates on commodities which the Commany monwealth considers important to the economy from Gulf ports to Puerto Rico are remarkably identical to those of Sea-Land from the North Atlantic to Puerto Rico. Of 52 rates compared, 28 or 54 percent of GPRL's rates are the same as Sea-Land's corresponding rates despite their striking differences in modes of service.59 GPRL's service is mainly breakbulk whereas SeaLand's is fully containerized; and the size and type vessel employed by the two companies varies considerably. This similarity in rates may be due to the fact that the New Orleans-San Juan and the New YorkSan Juan distances are virtually the same.
D. CONTAINERIZATION AND NEW RATE STRUCTURES
As discussed earlier in this chapter, the present containerized carriers in the Puerto Rican trade not only publish a large number of AQ-type rates, which were inherited from the tariffs of the old breakbulk carriers serving the Puerto Rican trade prior to 1960, but also now include TL and LTL rates. In addition, the carriers have begun to modify their tariffs to include various per container rates to accommodate the movement of cargo in containers or trailers. These new per container rates include maximum charge per container rates by commodity; flat dollar charge per container rates by commodity but without regard to the actual weight or measurement of the cargo loaded into the
58 Rates applicable to the Commonwealth's list of essential consumer and intermediate goods (app. B) were selected for examination. Appendix E, table 10, contains the specific rates and comparison figures.
59 Except for the rate on feed and feedstuffs, which was 24 percent lower than Sea-Land's, GPRL's rates on the remaining 23 articles examined were 3 to 113 percent higher than those of Sea-Land (app. E, table 10).
container, and flat dollar charge per container rates without regard to the weight, the volume, or the commodity loaded into the container. The first two types of per container rates now exist in some of the tariffs, and there is a trend toward more and more of these specialized rates which are designed to meet the container movement of cargo. The trend toward the increased use of container rates in the Puerto Rican per trade is, therefore, discussed below and some of the advantages and difficulties inherent in this new type of rate structure are analyzed.
Examination of rates from Atlantic Coast ports shows that TTT, Sea-Land, Seatrain, SACAL, and TMT have greatly increased the use of maximum charge per container rates in this trade. Maximum dollar charge per container rates, as previously explained in the beginning of this chapter, means that when the unit charge for the commodity in cents per 100 pounds or cents per cubic foot reaches a stated maximum dollar charge, no additional unit charge will be made for additional weight or volume of the commodity shipped in that container.
Certain of these carriers have modified their tariffs to include a number of flat dollar charge per container rates with charges varying by commodity. Under this type of rate a per container charge, such as $600, is assessed for the carriage of a particular commodity in the container without regard to the weight or volume of the commodity in the container. For example, TTT's tariff covering carriage of cargo on the SS Ponce De Leon contains more than 100 commodity rates stated as a flat dollar charge per container, and other carriers in the trade similarly have added rates of this type.
2. Flat Container Rates
The concept of flat dollar charge per container rates is an attempt to translate the technological efficiencies inherent in containerization into new rate structures which in many ways appear to offer considerable benefits to shippers, carriers, and consumers alike. However, these rates also create severe practical and competitive problems for the carriers.
There are a number of obvious advantages which will accrue to the carriers and shippers under the new
60 In addition, FAK rates which are basically flat dollar charge per container rates exist in various tariffs in this trade. These rates apply on trailerloads without regard to the weight or measurement of the cargo loaded into the container and are limited to only a few commodities.
type flat dollar charges per container rates. First, there would be a much simpler tariff rate structure, containing fewer rates, thereby greatly simplifying billing and payment of freight charges. Second, under flat dollar per container charges the present problems of misclassification or mismeasurement of cargoes in order to obtain unfair freight rate advantages would disappear. Thus, by eliminating rates dependent upon weight or measurement, flat container rates would reduce the need for the FMC's container inspection program. Third, flat dollar charges per container without regard to the commodity, would eliminate possibilities of rate advantages through misdescription of the shipment. Fourth, because the flat dollar charge would apply without regard to the volume of the commodity in the trailer, the shipper would have an incentive to fill the container both as to weight and measurement, thus leading to better utilization of container equipment, improved carrier efficiency, and lower rates. Finally, there would be an increased compatibility with inland rate structures, since rail and motor carriers are tending toward increasing the number of rates on a flat per container or per trailer basis.
In contrast to the foregoing obvious advantages, there are certain difficulties which would be created by this type of simplified rate structure, among which are the following. All commodities cannot necessarily afford to pay the same level of freight rate. Because of variations in marketing conditions, value of the goods and competitive factors, certain commodities can afford to pay relatively high freight rates, whereas others need much lower freight rates in order to sell in a competitive market. The present Commission policy of favoring lower rates on cost of living necessity type commodities. while allowing luxury (or more valuable) commodities to pay higher rates reflects the need for recognizing factors other than cost in determining freight rates. Establishment of flat dollar charge per container rates without regard to the commodity involved would seriously alter rate structures based upon varying per hundred weight and per cubic foot charges for different commodities. Because of the varying size of containers and trailers and the unknown factor of how full a shipper may be able to load a particular container, flat container rates make it very difficult for a competing carrier, which charges unit rates per 100 pounds or per cubic foot to know the effective unit rate which it must meet, leading to possible excessive rate cutting.
Although certain difficulties may be involved in flat dollar charge per container rates, without regard to the commodity, weight, or measurement of the item loaded into the container, ocean transportation should not adhere to traditional rate structures which may artificially restrain the application of the ultimate efficiencies inherent in containerization, simplification of tariffs, and other benefits of technologcal advances. The FMC should not insist or require that common carriers adopt specialized flat dollar charge per container rate structures. The Commission, nevertheless, should be flexible in its regulation, thereby encouraging more efficient rates and the adoption of regulations which would facilitate the continuing trend towards such rate
As rate structures in the Puerto Rican trade move toward the flat dollar charges per container rates (i.e., first to per container rates varying by the commodity involved and then possibly toward per container rates without regard to the commodity involved) the Commission's policy of favoring relatively lower rates on certain low-value cost of living necessity-type commodities and permitting higher rates on the high-value luxury-type commodities, should be preserved.61 This would be possible through the establishment of a classification-type rate structure with lower flat dollar charges per container rates on certain of the low-value necessity-type commodities and higher rates on the more valuable luxury-type commodities.63
Competitive influences may result in further refinements in flat dollar charges rates, making these per container rates even more appropriate in accommodating the forthcoming large scale movement of containers through a few terminals in mammoth containerships (see ch. VI section B.2.c.). It should be recognized, however, that these rates will probably never completely replace traditional rate structures for commodities flowing in breakbulk form or LTL quantities which do not lend themselves to the full containerload concept (e.g., construction materials and heavy machinery).
61 The FMC's policy of favoring low rates on basic foodstuffs and other consumer articles essential to the economy of Puerto Rico was announced in the Commission's 1965 investigation entitled, Reduction in Freight Rates on Automobiles-North Atlantic Coast Ports to Puerto Rico-8 F.M.C. 410(1965) (See ch. V, section B.2.).
62 For example, where freight is only 1 to 5 percent of the commodity's wholesale value (e.g., heavy machinery), a rate increase may be relatively unimportant. However, where freight is more than 10 percent of the wholesale value of a relatively low-priced commodity (e.g., rice and beans), a rate increase may have an important impact on Puerto Rico's economy (See ch. V).
E. THE RELATIONSHIP BETWEEN
As noted in the foregoing pages, it appears that common carrier rates from U.S. mainland sources of supply to Puerto Rico have remained relatively steady over the past eight years (app. E). Also, the comparison of specific conference commodity rates from New York to islands nearby Puerto Rico, including Jamaica, Haiti, and the Dominican Republic, shows that only one conference rate of 125 rates examined was lower than the corresponding commodity rates from New York to San Juan. In addition, it was noted that these foreign conference rates to the same nearby Puerto Rican islands have experienced significant general rate increases over the past decade while those to Puerto Rico have had a very favorable rate history with no general rate increases. These comparisons and rate relations would tend to indicate that ocean rates from the U.S. mainland to Puerto Rico are relatively low. However, the fact that rates are relatively low is not persuasive that ocean freight rates to Puerto Rico are legally reasonable. Cost factors must be considered.
The FMC has administered its authority over the Puerto Rican trade so that common carriers are permitted to receive no more than a fair and reasonable rate of return on * that amount which is required to meet all allowable expenses of providing service, including the cost of acquiring or retaining the capital needed to provide service." 63
Consequently, it becomes important not only to consider rate comparisons and relationships but also to compare rates against the carrier's cost of service. General Orders 5 (G.O. 5) and 11 (G.O. 11) 64 require the reporting of carriers' overall revenue and expense information and are instruments used in analyzing these factors on a company-wide and FMC regulated trade-wide levels. These reporting statements are de
63 See, e.g., Alcoa Steamship Co., Inc.-General Increase in Rates in the Atlantic-Gulf Puerto Rico Trade, 9 F.M.C. 238 (1966). In this case, Alcoa requested a 15 percent rate of return. However, the Commission stated: "We feel that considering all the circumstances a rate of return not in excess of 10 percent is reasonable on this record, and rates allowing for a greater return are unreasonable". The Commission has approved the following rates of return for carriers in other domestic offshore trades: (1) Pacific Coast/Hawaii-8.32 and 10.5 percent (General Increases in Rates, 1961, 7 F.M.C. 260, 1962), (2) Pacific-Atlantic/Guam-6.42 percent (Pacific-Atlantic/Guam Increases in Rates, 7 F.M.C. 423, 1962), (3) Pacific Coast/Alaska-9.07 percent (General Increase in Alaskan Rates and Charges, 7 F.M.C. 563, 1963).
64 G.O. 11 statements provide an account of income and expense and rate base data applicable solely to common carriers' domestic offshore operations. In contrast, G.O. 5 statements provide an account of income and expense and rate base data on a company-wide level.
signed for and are generally adequate only with respect to general revenue changes and needs.
However, the Commission is faced daily with various specific regulatory problems which require more detailed cost information than that obtainable from these financial reports. These problems include:
(1) Frequent selective rate increases on essential commodities which cannot be effectively analyzed by the staff without specific cost information.
(2) Frequent rate adjustments in certain categories of cargo, such as LTL traffic, where the carrier argues that the cost of handling such cargo is higher than that of other categories;
(3) Rate changes in which the carrier has converted weight or measurement rates to an allweight basis; and,
(4) Rate changes which propose differentially lower or higher rates between South Atlantic and North Atlantic ports requiring, among other things, proof of advantages in costs.
Although there are no specific criteria for determining the reasonableness of a rate, nor has any definite test been developed by transportation experts, one of the most important elements for rendering rate analysis most meaningful is cost accounting information. Even though many other factors, including load conditions, distance, trade conditions, competition and value of service are involved in the ratemaking process, in the judgment of the Commission's staff, cost is important for analyzing and comparing rates and their effect on the economy being considered. This has been emphasized in several important transportation cases. (See: Matson Navigation Company Pallets and Containers, Pacific Coast/Hawaii Trade, 7 F.M.C. 771, 1964; Reduced Rates on Machinery and Tractors to Puerto Rico, 9 F.M.C. 482, 1966; and, Gulf Westbound Inter-Coastal Soya Bean Oil Meal Rates, 1 USS BB 554, 460, 1936). In Reduced Rates on Machinery and Tractors to Puerto Rico, 9 F.M.C. 482 (1966), for example, the Commission said:
we find both the 43 and 37-cents rates of SACAL to be unjust and unreasonable' under section 4 of the 1933 Act. There is no justification of such rates in terms of 'cost' or 'value of service' **Therefore, we find the 43 and 37-cent rates of SACAL for the carriage of heavy machinery to be violative of section 16 First and fix the minimum rate for SACAL for the carriage of heavy machinery (except road scrapers) at 48 cents, including arrimo."