Maritime shippers will begin paying a new “enhanced security fee” over cargo brought into the San Juan port starting next week, which Ports Authority Executive Director Alberto Escudero defended Wednesday, amidst criticism and concern from local trade organizations and politicians.
During his first press conference since taking office eight months ago, Escudero also rejected public claims of alleged irregularities regarding the process through which the agency selected Rapiscan Systems, the company that will operate the electronic container inspection system for the next 10 years.
Insisting that the new fee — which has been fixed at $60 per ton of cargo — is not a new tax or added excise, Escudero said it is a necessary component of the agency’s plan to beef up ports security to crack down on contraband items and products introduced to the island that may be illegal in nature or hidden to avoid paying excise taxes, a historical problem Puerto Rico has had at its ports.
“What we’re pursuing is to increase inspections at the port, which now add up to only 2 percent of the cargo that the island receives,” he said, noting last year, some 313,000 cargo containers arrived to Puerto Rico. “Federal agencies only inspect between 5 percent and 6 percent of those containers.”
The goal is to be able to inspect 100 percent of the containers by September. Rapiscan, a global supplier for high-quality security inspection solutions, stands to make as much as $13 million a year through the contract with Ports. The company will keep $57 of the $60 fee, and Ports will collect the rest to cover operational expenses related to the new security system, Escudero said.
The first shipper to launch the new security system will be Crowley, which will quadruple the number of containers inspected once the machines are in place. Sea Star Lines and Horizon Lines are next in line for the system installation. The scanning would focus on containers not previously inspected by U.S. Customs.
Ports has been working on establishing new inspections procedures for the better part of the last two years. The process called for public requests for proposals, bids and public hearings during which affected shippers participated. In December 2010 Sea Star Line said the new regulation could affect the availability of cargo and warned clients that their costs would increase as a result.
On Wednesday, Escudero also addressed the issue of costs, particularly as related to the link in the chain usually most affected: the consumer.
“There has been talk about a domino effect with regards to this new fee. However, it must be said that the new fee represents half a cent for every three pounds of cargo transported,” he said. “We’re already taking steps so that this does not affect consumers, as we’ve already spoken to the Consumer Affairs Department to make sure unscrupulous parties do not try to take advantage of this.”
MIDA, PRMA weigh in
Escudero’s comments drew immediate reaction from the Chamber of Food Industry Marketing and Distribution, known as MIDA, and the Puerto Rico Manufacturers Association, who favored the improvement of container inspections, but asked that it be a “transparent” process.
During a joint press conference of their own, the trade groups also denounced the alleged irregularities related to the contract awarded to Rapiscan, saying it was the highest bidder, chosen over a competitor who would have charged $135,000 less a year. The decision has been challenged in court.
He also said the hearing process was irregular because the regulations were drafted nearly a year after the contract was awarded, and substituted for a new set in January.
“That was because U.S. Customs told the government it could not inspect containers pertaining to international commerce. [Ports] had to eliminate 30 percent of the cargo and adjust the contract and regulations to compensate for the loss for the hired company,” said Manuel Reyes, vice president of MIDA. “It was a procedure plagued with mistakes and inconsistencies that hint at the fact that Puerto Rico will not solve the crime problem, but rather terminate a bureaucratic process.”
Meanwhile, the PRMA said the contraband and firearms problem is not related to shipments coming from the U.S., as confirmed by independent and government studies.
“Let’s not set this up as a security issue. If Ports needs more revenue, let’s get together. Companies are willing to help,” the PRMA said.
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Business reporter with 27 years of experience writing for weekly and daily newspapers, as well as trade publications in Puerto Rico. My list of former employers includes Caribbean Business, The San Juan Star, and the Puerto Rico Daily Sun, among others. My areas of expertise include telecommunications, technology, retail, agriculture, tourism, banking and most other segments of Puerto Rico’s economy.