An agreement filed at the Federal Maritime Commission (FMC) allowing a joint venture between two adjacent terminals at the Port of San Juan, Puerto Rico, applies from August 29. However, concerns about the agreement and its affects on the marketplace will lead the FMC to adopt a more vigorous oversight plan than its traditional monitoring program.
According to the terms of the Puerto Nuevo Terminals LLC Cooperative Working Agreement (FMC Agreement No. 201292), marine terminal operating companies Luis Ayala Colon (LAC) and Puerto Rico Terminals (PRT) will form a new company (Puerto Nuevo Terminals or PNuevoT) with its membership units held 50/50 by the two owners.
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PNuevoT will then acquire all terminal services agreements, land leases, cranes, yard equipment and other related assets from LAC and PRT. After that, PNuevoT will negotiate and enter into all terminal services agreements, crane and other yard equipment purchases or leases, coordinate labor for on dock stevedoring and all other matters regarding the normal operation of a marine container terminal.
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.
However, the Commission is worried 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 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
FMC said.
In addition, the FMC takes due notice that many parties across the Commonwealth of Puerto Rico filed comments that expressed significant concerns about the possible impact on competition as well as on transportation costs and options under this agreement.
Nevertheless, 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.
By allowing the agreement to apply, the Commission wants to examine available options to make sure the PNT Agreement does not breach the Shipping Act. Under its authority, the Commission will order an improved monitoring regime for the Puerto Nuevo Terminals LLC Cooperative Agreement with extensive disclosure of business and marketplace information required.
More specifically, 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
