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  • Writer's pictureFirst Port Global (FPG)

FMC allows Puerto Rico terminal joint venture

The US Federal Maritime Commission will allow two terminals in San Juan to merge, despite strong opposition to the move in Puerto Rico.

The US Federal Maritime Commission (FMC) has voted to allow the marine terminal operating companies Luis Ayala Colon (LAC) and Puerto Rico Terminals (PRT) to form a new 50/50 joint venture company called Puerto Nuevo Terminals (PNT). “LAC and PRT will withdraw from that business leaving PNT and the Crowley container terminal as the only two container terminal operators in San Juan, Puerto Rico,” the FMC noted.

The move has been strongly opposed by shippers and cargo owners in Puerto Rico, who appealed to both the FMC and commonwealth of Puerto Rico’s House of Representatives to stop the joint venture. PRT is affiliated with TOTE Maritime, which took over the Puerto Rico services of Sea Star Line. If the joint venture goes ahead, Puerto Rico’s House of Representatives said, “these companies would have almost total control of the cargo business in the Puerto Nuevo terminal of the Port of San Juan, creating what could be considered a monopoly.”

The House of Representatives recalled a previous case where “several shipping companies, including Sea Star Line, LLC, today Tote Maritime, pleaded guilty to violations of the "Sherman Antitrust Act" for conspiring to eliminate competition and increase the price of freight transport between The United States and the Island. Another of the companies that accepted guilt at that time was Crowley Liner Services, Inc. Both being part of the movement that sought to create a monopoly on maritime transportation costs to Puerto Rico, which authorized this collaborative agreement which could create extraordinary control at the port terminals on the San Juan pier, could result in the People of Puerto Rico.”

The FMC was not convinced, however: “The Commission appreciates that the Puerto Rico market is served by a limited number of domestic and international ocean carriers transporting a relatively low volume of trade as compared to large mainland port areas. The Commission also appreciates the current overcapacity in terminal services, and the desire through the agreement to rationalize services and obtain efficiencies. Concurrently, the Commission takes due notice that many parties across the Commonwealth of Puerto Rico filed comments that expressed serious concerns about the potential impact on competition as well as on transportation costs and options under this agreement. However, the Commission also acknowledges the parties’ negotiated concession to maintain current 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 and/or electricity,” it said in its decision.

Noting that there was strong opposition the FMC said it will “adopt a more vigorous oversight plan than its traditional monitoring program.” This will require “extensive disclosure of business and marketplace information.”

The decision and the extent to which it actually has jurisdiction in the issue divided the FMC. Chairman Khouri stated, “The Commission did not reach consensus on the threshold question of whether the agreement comes within Shipping Act jurisdiction. 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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