Puerto Rico has less than one week’s supply of fresh foods stored on the island at any given time, making reliable food deliveries one of the key advantages of the Jones Act, according to a study by the General Accountability Office.
Asked to study the effect the cabotage law has on Puerto Rico’s economy following the conviction of Jones Act carrier executives for price-fixing in the market several years ago, the GAO said its findings were inconclusive. Repealing or amending the Jones Act cabotage law might cut Puerto Rico shipping costs but would have a “highly uncertain” impact on competition and the U.S. shipping industry.
“Some of the cargo imported from the United States is temperature-controlled perishable goods, such as dairy, meat and agricultural products,” the GAO said in the report. “According to representatives of the Puerto Rico Farm Bureau, the cost and reliability of shipping perishable food items is important because the island has less than a week’s supply of perishables at any given time.”
The agency report said it gathered rate and service information from the four major Jones Act carriers serving Puerto Rico — Horizon Lines, Crowley Liner Services, Sea Star Line and Trailer Bridge — and shippers that use those services. “The four carriers generally provide reliable, on-time service between the United States and Puerto Rico, allowing shippers to meet just-in-time delivery needs,” the GAO said. “In fact, many island importers’ inventory management relies on prompt and regular shipping and receipt of needed goods to stock shelves, instead of warehousing goods, a benefit that helps minimize inventory storage costs.”
According to the report, shippers said warehousing is costly in Puerto Rico because of high energy costs and because the Puerto Rico government imposes inventory storage taxes on certain goods imported into and manufactured in Puerto Rico. High energy costs would be particularly felt by operators of refrigerated warehouses.
“According to some shippers, reduced reliability of service could result in shippers needing to keep larger inventories of products, and could thus increase warehousing and inventory-related costs for companies in Puerto Rico,” the report said.
Shippers told the GAO that inventory management requires frequent and reliable service — a practice that costs less than warehousing goods on the island.
Sea Star Line in April pointed to high and building demand for refrigerated shipments when it announced it was taking possession of 750 new 40- and 45-foot reefer containers.
The carrier said it has increased its refrigerated container fleet by 25 percent in the past year to better serve the Puerto Rico trade. Sea Star is also in the second year of a five-year refrigerated equipment replacement plan that aims to reduce the average age of the Sea Star reefer container fleet to less than three years. Sea Star also recently entered a five-year agreement to acquire gensets to support the larger reefer fleet.
Sea Star has increased the number of reefer plugs on its vessels by more than 35 percent to accommodate the increased reefer capacity.
Horizon officials cited the Puerto Rico trade as one reason for the carrier’s move from northern New Jersey to the Packer Avenue Marine Terminal at the Port of Philadelphia. The Packer terminal is located near wholesale food markets, making Philadelphia a convenient port for a number of Horizon’s shippers.
Terminal operator Holt Logistics estimates Horizon’s new Philadelphia-Puerto Rico runs will bring 340 full-time jobs to the facility, a 10 percent boost, and provide several hundred other jobs to nearby businesses.
The agreement calls for weekly vessel calls with cargo to include a variety of foods, chemicals and medicines over the next 10 years. Holt Logistics President Leo Holt said he predicts sustained growth in jobs and revenue during the decade. “These are bread-and-butter, very stable commodities,” he said at a ceremony marking Horizon’s first call. “It plays right into Philadelphia’s strong suit as a handler of food products and perishable goods.”
Contact Stephanie Nall at email@example.com.