The Puerto Rico Chamber of Food Marketing, Industry & Distribution (MIDA by its Spanish acronym) filed a legal action in federal court to stop the enforcement of the new rates recently approved by the Bureau of Transportation and Other Public Services (NTSP, Spanish initials) in order to protect the existing contractual agreements for the transport of food, and to avoid an increase in food costs that would impact consumers.
The lawsuit seeks for the regulation and circular letter of the NTSP, which establishes the new rates, to be declared invalid and unenforceable, as well as the declaration of a permanent injunction preventing the government from issuing sanctions for alleged non-compliance. This takes place just after the Financial Oversight and Management Board (FOMB) yielded to all the truckers' claims related to the haulage and merchandise tariff.
"We have 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 MIDA.
He added that the NTSP's actions are in violation of the Puerto Rico Oversight, Management and Economic Stability Act (Promesa), since the circular letter was not previously submitted to the FOMB for review and approval. Also, the rates are in contrast to the approved fiscal plan for fiscal year 2020-2021.
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. Therefore, far from deregulating what was regulated as mandated by the fiscal plan, the authority of the NTSP 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.
“When the NTSP imposed temporary transportation rates in December, it did so by ignoring the commercial relationships between independent carters and food stores. No serious analysis was made of the impact of a change of this magnitude on our economy. Historically, the Public Service Commission —the predecessor of the NTSP— 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 is absurd. and defeats the purpose of private contracts, to pretend to apply rates designed for individual trips when thousands of trips are contracted, offering guarantees and certainty to transport companies," Reyes said.
He stressed that the rates included in the new NTSP regulation did not consider the functioning of the food distribution industry. He explained that the food distribution and transportation scaffolding is a complex one, in which companies hire independent truck drivers individually.
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.
Reyes clarified that this hiring 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.
“They have created a problem where there was none. The industry has always had a good relationship with its thousands of careers, which is evidenced by business relationships that last decades. 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 has not wanted to intervene, those of electricity and the international ones that we do not control. We urgently call on Governor Pierluisi to listen to the food industry, to defend consumers from these increases and to allow us to clarify the confusion caused by a small sector that does not represent the entire private transport industry," he stated.