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Puerto Rico gov’t steers clear of agreement to manage main San Juan cargo port

By on September 18, 2019

Junte de Voluntades spokesman Mark Anthony Bimbela (Juan José Rodríguez/CB)

Ports chief: Only Justice Dept., which is evaluating if it is a monopoly, can intervene

SAN JUAN —  A group comprising trade and labor organizations, dubbed Junte de Voluntades, asked Puerto Rico Gov. Wanda Vázquez to put a stop to an agreement that allows maritime cargo operators Puerto Rico Terminals (PRT) and Luis Ayala Colón to collaborate as Puerto Nuevo Terminals (PNT).

While Junte de Voluntades claims the entire operation at the Port of San Juan has been conceded to the PNT joint venture, the executive director of the Puerto Rico Ports Authority, Anthony Maceira, said only the Justice Department would be able to intervene with the new venture, were it to find it in violation of antitrust regulations.

At a press conference Tuesday at the Puerto Rico Bar Association building in San Juan, Junte de Voluntades spokesman Mark Anthony Bimbela, accompanied by the executive vice president of the Chamber of Food Marketing, Industry & Distribution (MIDA by its Spanish acronym), Manuel Reyes; United Retailers Association (CUD by its Spanish acronym) President Jorge Arguelles; and Germán Vázquez, president of the Transportation and Related Branches Union, among others, said that under the agreement, known as “Agreement No. 201292,” PNT would manage about 80 percent of the containers and 11 of the 14 cranes in the Port of San Juan, with the remaining 20 percent of the containers and three cranes managed by Florida-based Crowley Maritime Corp.

(Juan José Rodríguez/CB)

“Puerto Rico is an island dependent on maritime transportation for all its commerce, economic and food viability, it’s an embarrassing scandal that the Puerto Rico Ports Authority has agreed to allow for the control of 100 percent of the Port of San Juan, precisely, with several shipping companies, that after the passage of Hurricane Maria opposed foreign-flagged ships bringing goods into Puerto Rico,” Bimbela told reporters.

For his part, Reyes said, “It is unbelievable that after such a history of abuse, the Ports Authority will reward them with the absolute control of the Port of San Juan.”

Only four companies operate in the island’s ports: Intership, Tote Maritime, Crowley and Luis Ayala Colón (LAC). The latter provides services to international ships and smaller shipping companies. 

An agreement filed at the Federal Maritime Commission (FMC) allowing the joint venture between two adjacent terminals at the Port of San Juan went into effect Aug. 29. However, the FMC noted that concerns about the agreement and its impact on the market led the commission to adopt stricter oversight that its traditional monitoring program.

Maceira told Caribbean Business that “it should be clear” that the Ports Authority’s roles is more akin to managing the real estate. “So when they ask the governor to not authorize the agreement; there is no agreement with Ports,” he stressed.

Anthony Maceira Zayas, executive director of the Ports Authority (CB file)

Maceira said that when the U.S. Congress passed the Shipping Act in 1984, “they did so as a deregulation legislation,” establishing that cooperative agreements automatically become effective after 45 days.

“The FMC can file an injunction in Washington, D.C., and/or extend it if a request for information (RFI) is made, in which case it can be extended for another 45 days…. That is what they did, the RFI and extended the period for 45 days.”

When evaluating the agreement, Maceira said, the FMC considered whether the agreement would hinder competitiveness, if there are no reasonable transportation services and if transportation costs would rise.

“In this case, they evaluated those three criteria, framed in these facts: Puerto Rico’s market is served by a limited shipping market, the cargo volume, commercial trade, which is less than the ones [stateside], the FMC considered the overcapacity of terminal services at the Port of San Juan and that efficiencies are reached; the opposition presented to the agreement and maintaining the same rates, meaning that they won’t go up or down until 2020,” Maceira said.

Based on the evidence the FMC had, Maceira noted, it understood there were no sufficient elements or evidence that competitiveness would be affected or that costs would increase, among the other elements considered.

The Ports official said that although the different groups argue these issues could arise, evidence to support the developments has not been produced.

“It’s speculative,” Maceira said. “If in the implementation one of the elements takes place for the FMC to file an injunction, that’s another thing. But today, anything else is speculative.”

The official reiterated that Ports didn’t put the agreement into force. As for the “term monopoly, that is a legal term, which the Justice Department is currently evaluating,” Maceira said.

Asked whether the government had weighed the benefit costs for the island with this type of agreement, Maceira said, “This is a public policy discussion. The government of Puerto Rico established decades ago that the Ports Authority is basically a real estate manager; if that is adequate in terms of public policy or if Puerto Rico should be like other ports, like Jacksonville, where the Ports Authority operates the port, operates the terminal…. That entails costs, equipment, etc.; that is a public policy discussion.”

The Puerto Rico Ports Authority’s role is to make sure the companies comply with the terms of their contracts, Maceira said.

“In fact, this was a debate after Hurricane Maria…if the government should be the one that controls the ports. The reality in Puerto Rico has been for decades that it’s privately operated. So the Justice Department is evaluating through its Monopoly Division if this agreement in effect is a monopoly or if it’s a practice that they would have jurisdiction over….” 

The agreement filed with the FMC states that under the terms of the Puerto Nuevo Terminals LLC Cooperative Working Agreement, Luis Ayala Colón and Puerto Rico Terminals will form a new company, Puerto Nuevo Terminals, with its membership units held 50/50 by the two owners.

“PNuevoT will then acquire, through assignments, leases, sub-leases, transfers, and other corporate means, all terminal services agreements, land leases, cranes, yard equipment and other related assets from Luis Ayala Colón and Puerto Rico Terminal,” reads a statement issued by the FMC. “The Commission is concerned that, once the agreement takes effect and the new PNuevoT begins operation, the resulting reduction in competition may produce an unreasonable reduction in transportation service or an unreasonable increase in transportation cost.”

The commission also acknowledged that the parties’ negotiated concession to maintain 2019 rate levels through 2020, with the limited exceptions being changes in labor rates, insurance surcharges attributable to natural disasters or an energy cost adjustment factor based on the actual cost of fuel or electricity. Though allowing the agreement to go into effect, “the Commission intends to examine available options to ensure the PNT Agreement does not violate the Shipping Act,” it said.

“The Commission did not reach consensus on the threshold question of whether the agreement comes within Shipping Act jurisdiction,” Commissioner Michael Khouri said in FMC’s statement. “Next, a majority could not determine that we have enough information and evidence at this time to go to Federal Court to seek an injunction to prevent this agreement from going into effect. We understand what the parties are trying to achieve, but serious concerns remain about the implementation of the agreement. The Commission will take necessary measures to ensure that the agreement is not implemented in a manner that violates the Shipping Act.”

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