Byline: Joanna Ramey

WASHINGTON — A southern Florida rate war for Caribbean and Central American-bound ocean freight, particularly apparel assembled in the region from U.S.-made textiles, is under way since the recent demise of a cartel that controlled the region’s shipping.
The Latin American Shipping Service Association began disbanding in late October after months of what sources described as infighting over rates among its six carrier members, who gradually dropped out of the group and began undercutting each other.
This development has been widely hailed by companies that have long complained about escalating costs of shipping apparel to and from assembly plants in 21 countries benefiting from special Section 807 trade status. This status allows countries to assemble apparel made of U.S.-cut textiles and pay duty only on the value added. In some cases, such apparel carries unlimited quota.
“This is a crucial development for people in twin-plant operations,” said Tom Travis, general counsel of the U.S. Apparel Council, based here, representing Section 807 companies. “Transportation prices affect the price of apparel, so as prices are driven down, sourcing apparel in the Caribbean basin becomes even more attractive.”
LASSA, whose officials didn’t return telephone calls, in existence only about 18 months, was one of many attempts to organize ocean carriers into cartels. Such groups, known as conferences, are given immunity from U.S. antitrust laws so they will maintain efficient and dependable movement of ocean-bound freight.
Although there is myriad competition among independent ocean cargo carriers in the Caribbean basin, companies shipping apparel there had stayed with LASSA firms because of their frequent sailings and other services crucial for moving time-sensitive fashions. Now former LASSA carriers find themselves battling prices set by the independents, which include so-called banana boats specializing in bringing fruit into the port of Miami and ferrying cut textiles back to their home ports.
Jose Aguirre, vice president of Miami International Forwarders Inc., specializing in 807 cargo, estimates prices for some shipments from former LASSA members have already plunged 15 to 20 percent. “It is obviously a more competitive marketplace,” he said.
Tim Saling, director of Americas Service for Maersk Inc., one of the companies that resigned from LASSA, agreed prices have dropped up to 20 percent, but said the slide “seems to have leveled off.” Now carriers are duking it out over service, he said.
Malcolm Robinson, logistics manager for Levi Strauss & Co., said carriers are eagerly courting Section 807 companies with a new consumer consciousness. “They are now all of a sudden trying to sign up big shippers. For the first time, they are concerned about their shippers’ concerns,” he said.
While it’s a boost for apparel companies to be at the helm, there is a limit to how low prices can go without compromising port security, said Norman Gelber, president of Customs & Trade Services Inc., a Miami freight forwarder specializing in 807 trade.
Gelber fears some major carriers — former LASSA members — are so squeezed by the Caribbean shipping free-for-all that they might start to form another conference to stabilize prices.
Because of Caribbean port sizes, carriers here are much smaller than their Asia- and U.S.-bound counterparts, but their fuel costs and port charges are comparable.
LASSA’s demise has been a boon to an association of Section 807 companies formed last fall to gain leverage with LASSA carriers and a host of independents by buying bulk cargo space. The 807 shippers’ association was unable to come to terms with LASSA; now former LASSA members are courting the association, said Travis. The association is run by the U.S. Apparel Council. Among its members are Levi Strauss, Sara Lee Corp., Winston-Salem, N.C.; Salant Corp., New York; Wrangler Inc., a division of VF Corp., and Haggar Apparel Co., Dallas.
“Some of the largest members of LASSA have contacted the shippers’ association and have inquired whether the association will be interested in entering into contracts,” Travis said.
Robert Rowan, corporate traffic manager with Wrangler, likened the breakup of LASSA to the deregulation of the U.S. trucking industry in the 1980s.
“A lot of trucking companies went out of business and others stuck with it by offering better service and prices,” he said.

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