WASHINGTON — Competition in the southern Florida transportation arena seems to be keeping already steep apparel shipping costs in the Caribbean in check, although there is some concern prices could edge up, according to industry officials.
“You can get a box from Hong Kong to L.A. cheaper than a box from Honduras to Miami,” said Robert Rowan, corporate traffic manager, Wrangler Inc., a VF Corp. division. Wrangler has one factory in Costa Rica and two in Honduras where apparel is assembled from U.S.-made-and-cut textiles.
But Rowan and others in the industry note that this imbalance isn’t likely to reverse, since the economies of scale seen in the Far East aren’t present in the Caribbean, where, for example, small ships a tenth the size of the trans-Pacific fleet are the rule in the harbors of the Caribbean.
Added costs are already appearing on the horizon, but how widespread they will be remains to be seen.
To combat costs due to increased theft at the Guatemala port, the carriers will begin levying a $200-per-container charge, while in Honduras $300 surcharge has been scheduled for costs arising from port congestion. Both surcharges are scheduled to go into effect Jan. 1, 1995. These charges are being instituted by the Latin America Steamship Association, a group of ocean carriers, known as a conference. When shipper groups are defined as a conference, they have antitrust exemption to set rates.
LASA, formed in March, represents the principal ocean carriers sailing from southern Florida’s three ports.
“The conference does have an effect on rates. There’s no doubt about it,” said Thomas G. Travis, of Sandler, Travis & Rosenberg, a Miami attorney specializing in apparel assembly trade.
For future leverage against the conference, some apparel concerns are considering forming their own association to flex their bulk-purchasing power, Travis said.
Apparel shippers, too, can turn to non-conference carriers in search of lower rates, he pointed out.
Nevertheless, officials in the apparel shipping industry claim the base rate, for both conference and independent carriers, for most Caribbean Basin ports remains competitive. They quote a $2,000-per-40-foot-container price as the average one-way fee. What’s keeping prices stable in recent years is the increase in volume and competition among ocean, as well as air, carriers, they say.
“We’ve been very impressed by how much competition has grown in the ocean and air freight markets,” said Jose Aguirre, vice president, Miami International Forwarders Inc., specializing in 807 apparel cargo, estimating that cargo prices are lower than 10 years ago, when inflation is counted.
“I think there is enough competition, but the conferences, as a rule, probably have helped force prices up, in some of the markets.”
Aguirre cites higher transportation costs surfacing in apparel-assembly markets that are gaining in popularity, like El Salvador and Colombia. But, as has happened in other markets, as services improve with more competition, prices will likely again come in line, he said.
“It’s a very fast-moving market,” Aguirre said. “There is a lot of pressure on freight rates that is being exerted by the freight forwarders and shippers who can find alternatives, including inexpensive air cargo.”
Joe Debraga, administrator for the Associated Conferences Secretariat, representing LASA and the other regional conferences, said competition from carriers outside the conferences has kept rates “depressed,” a trend he doesn’t see changing in the near term.
“Rates are very competitive,” he said. “In Central America, there are a lot of outsiders. There are outsiders in Venezuela and the Caribbean. In the Dominican Republic, the conference has two members, and there are nine outsiders.”
The cost of transportation apparently hasn’t slowed down companies locating to the Caribbean Basin to set up apparel assembly operations. The proximity to the U.S. market, and duty breaks for apparel made from U.S.-made-and-cut textiles, are enough of a lure.
Sailing from one of the three ports in southern Florida, too, can provide for last-minute shipments since, unlike the Far East, cargo space can be booked as late as a day before sailing.
In the last five years, the amount of apparel cargo imported into the Port of Miami has increased by 121 percent to 147.2 million kilos in 1993 from 66.7 million kilos in 1989, according to statistics from the Beacon Council, a Dade County economic development concern.
For the first six months of 1994, apparel cargo through the port is up 14 percent to 77 million kilos against the first half of 1993.
Air cargo, however, has been slowing of late. In 1989, 28.1 million kilos of apparel came in through Miami International Airport. In 1993, the figure was 40.8 million kilos in 1993. The growth in 1993 was only 1 percent, while for the first six months of 1994 apparel air cargo was actually down 2 percent.
“There’s a lack of sufficient cargo space going to and from Miami,” said Norman Gelber, president, Customs and Trade Services Inc., specializing in 807 trade. Air cargo generally has seen strong growth in Miami over the past decade, with apparel often competing for air space with perishables, he pointed out.
“The airlines look at it as, ‘What’s going to spoil first?’ So, the flowers go first, the fruits and vegetables go next, and then apparel,” he said.
No matter what kind of transportation is used, Gelber and others predict that will be a virtual explosion in apparel-assembly trade in the Caribbean should the Congress decide to grant the Caribbean Basin countries the same trade benefits as Mexico under the North American Free Trade Agreement.
This would also bode well for transportation services and costs.
“If the parity bill passes, there will be no way to stop it from growing,” said Gelber. “That is the point at which everyone will open their eyes and when planes, boats and every conveyance known to man will show up in Miami.”
— Fairchild News Service