MIDA files federal lawsuit to halt application of transport rate hikes
The Chamber of Marketing, Industry and Food Distribution (MIDA, in Spanish) has filed a civil lawsuit seeking an injunction to prevent the enforcement of new transportation rates on existing contractual agreements, to prevent a hike in food prices.
According to the lawsuit filed at the US District Court for Puerto Rico, the trade group seeks the “annulment and voiding” of freight tariffs which it claims have been “illegally promulgated as a Bureau of Transport and Other Public Services (NTSP, in Spanish) circular letter imposing rates for all on-land cargo transported within the Commonwealth.”
The trade organization claims the rates included in the circular letter are in violation of the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) because they were not previously submitted for the review and approval of the Financial Oversight and Management Board for Puerto Rico.
“We’ve taken this urgent legal action, after having exhausted all avenues, with the aim of protecting consumers’ pockets and stopping another excessive increase in the operating costs of the food industry in Puerto Rico,” said Manuel Reyes-Alfonso, executive vice president of the organization.
The controversy surrounding the new rates bubbled over last week, when local truck transportation providers threatened to strike if the new rates were not honored. In response, the Oversight Board reached an agreement to re-examine the regulations regarding Puerto Rico’s overland transportation industry.
A new temporary minimum rate will be in effect under the condition that truck transportation operators do not strike, while the Oversight Board re-examines the overland transportation segment’s regulatory framework, the regulatory body said.
According to Reyes, there is misinformation because it is not about increasing rates that already existed but about imposing a new rate system on sectors that operated under private contracts negotiated in the free market for the benefit of both parties and especially the consumer.
So, far from deregulating what was regulated as ordered by the Fiscal Plan, the NTSP’s authority “is expanding and dramatically changing the way we do business in our economy. The resulting increase that the government intends to implement is to the detriment of the food industry and therefore consumers, who will be affected by any increase in prices resulting from the application of the new rates,” he said.
“When the NTSP imposed temporary transportation rates in December, it did so by ignoring the commercial relationships between independent carriers and food stores. No serious analysis was done of the impact of a change of this magnitude on our economy,” Reyes-Alfonso said.
Historically, the Public Service Commission, the NTSP’s predecessor, “had respected these relationships, excluding them from its regulatory rates because they were the same as those agreed between two private entities, the driver and the merchant. It’s absurd, and defeats the purpose of private contracts, to attempt to apply rates designed for individual trips when thousands of trips are contracted, offering guarantees and certainty to transport companies,” Reyes-Alfonso said.
The rates included in the new NTSP regulation did not consider the way the food distribution industry works, he said, adding that the food distribution and transportation structure “is a complex one in which companies contract individually with independent truck owners.”
Also, payments to carriers are based on the number of boxes or “packages” delivered to retailers. The rates vary according to the location of the stores to receive merchandise, and by the type of cargo to be delivered: dry; fresh; refrigerated; or frozen.
Other factors, such as the weight and size of the packages, also influence recruitment. Cargo delivery trips involve multiple stops at different stores and municipalities.
This type of contract is typically reviewed annually, so it is also incorrect to claim that the rates have not changed in 15 years but that they have been adjusted much more efficiently than any regulatory process, he said.
“They’ve created a problem where there was none. The industry has always had a good relationship with its thousands of carriers, which is evidenced by business relationships that last decades,” Reyes-Alfonso said.
“Every party in a negotiation can aspire to more, but it is this negotiation process that ensures efficiency in the supply chain for the benefit of the consumer. These increases would be added to those already imposed by the operators of the docks with whom the government hasn’t wanted to intervene, those of electricity and the international ones that we don’t control,” he said, urging Gov. Pedro Pierluisi to step in and listen to the food industry and defend consumers.
MIDA’s lawsuit is the second claim filed by private sector entities in relation to this regulation, with the Puerto Rico Chamber of Commerce having filed another in the local Appellate Court at the end of January.