Port Development in the United States (1976)

Below is the uncorrected machine-read text of this chapter, intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text of each book. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.

-~88- Regional Deepwater Port Facilities Studies The Army Corps of Engineers conducted three separate studies of the needs for deepwater port facilities on the Atlantic, *® Gulf, +9 and Pacific Coast.°® A1l three reports were issued in June 1973 and were concerned largely with facilities for oil tankers. Forecasts of petroleum demand and supply were taken from the various current studies and reports on the subject, particularly the Nathan report, previously described. In addition, the Atlantic Coast report briefly treated the requirements for deepwater iron ore and coal facilities. Iron ore demand was related to GNP while coal export projections were taken from the Nathan report. Foreign Trade Model of the Port Authority of New York and New Jersey An econometric model has been developed by the Port Authority of New York and New Jersey to forecast commerce at the port through 1990. First, total U.S. foreign trade was forecast on the basis of foreign pur- chasing power for exports and of U.S. purchasing power for imports (U.S. purchasing power is defined in terms of the U.S. GNP and the ratio of the U.S. price level to the foreign area price level. Foreign area purchasing power is defined in terms of the foreign area GNP and the ratio of the foreign area price level to the U.S. price level). Future growth in purchasing power was projected in both cases in relation to the corresponding GNPs. Low and high tonnage projections, differentiating between general and bulk cargo but without further commodity breakdown, were derived for 1980 and 1990. 48 YLS. Army Corps of Engineers, Philadelphia District, North Atlantic Division, Interim Report: Atlantic Coast Deep Water Port Facilittes Study, June 1973. 43 Tdem, Lower Mississippi Valley Division, Report of Gulf Coast Deep Water Port Facilities, 13 vols., Vicksburg, June 1973. 50 Idem, South Pacific and North Pacific Division, West Coast Deepwater Port Faciltttes Study: Summary Report, June 1973.

-~89- Second, New York's share of the total U.S. trade was projected on the basis of industrial activities and personal income in the port's hinterland, the relative dominance of foreign trading partners by geographic location, and the relative growth rates of commodities that are the specialty of the New York port. Low and high forecasts for New York to 1990 again were split between exports and imports within general and bulk categories. Finally, an ocean-air modal split of general cargo through the port was forecast, based mainly on trends experienced in air penetration and in transportation rates in relation to shipment value. These general cargo fore- casts were split in the same manner as the preceding. Required Data To evaluate the effects of technological changes and consequent shifts in the hinterland-port relationship for many commodities, it is highly desirable to have historical and forecast data to trace the trade routes of waterborne imports, exports, and coastwise movements of major commodities from source to destination. Data on exports, for example, would show the volume of a given commodity that originates in a particular U.S. hinterland, moves through a specific port range, and terminates in a certain foreign destination. To fulfill this format, data‘ would necessarily include the following: eeeCommodity flows for all significant movements; ee*Trade routes indicating foreign origins and destinations, by commodities and countries; °*eVolumes of trade by significant commodities at U.S. ports, aggregated by regions; and eeeJ.S. hinterland origins and destinations by significant commodities and volumes. Commodity Groups The various commodities moving through U.S. ports might be consolidated into major groups, such as

-90- 1. Liquid bulk--crude petroleum, petroleum products, | liquified gas, and other. 2. Dry bulk--coal, grains, iron ore, aluminum ores, logs and woodchips, phosphate rock, and iron and steel scrap (sometimes classified as general cargo). 3. General Cargo-——-break-bulk, container, automo— biles, iron and steel products (other than scrap), and wood products (packaged lumber, logs newsprint, plywood). Trade Routes Information on the domestic and foreign origins and destinations of significant commodities is necessary for analysis of selected commodity flows. Tonnages and the length of voyage between specific ports are also important in estimating the number and size of ships required for the various trades. Census data identify the foreign countries of origin and destination. For purposes of analysis these countries should be aggregated into the following regions: Canada, Caribbean, South America East Coast, South America West Coast, Western Europe, Medi- terranean, Eastern Europe, West Africa, Middle East and East Africa, Far East, and Australia and New Zealand. Port Ranges Statistics on the volume of trade through various port ranges or customs districts are essential for analysis of port requirements. These coastal regions should be separated into logical ranges to or through which foreign trade and coastwise traffic flows. The following ranges are suggested, based on logical splits between interport competition: North Atlantic Coast, South Atlantic Coast, Gulf Coast, South Pacific Coast, North Pacific Coast, Great Lakes, Puerto Rico, Hawaii, Alaska, and American Samoa. Hinterlands and Inland Routes To relate the inland portions of traffic flows to the seaborne portions, the United States could be divided into the following inland regions: Northeast, Mid-Atlantic, Southeast, North Central, South Central, Southwest, and Northwest. Data on movements by mode to interior areas are difficult to obtain. In addition, importers and exporters frequently do not have complete knowledge of interior origins or destinations.

~9]- Suggested Data Format For optimum usefulness, tonnages between foreign origins or destinations and United States ports of entry or exit should be shown in a matrix format. [Iron ore has been chosen as an example. Table 10 shows the overall relationship between foreign areas and U.S. port ranges. For maximum usefulness the matrix must be expanded to include the hinterland destinations, as shown in Table 11. Coastwise traffic should be included, but because there are no coastwise movements of iron ore, this traffic is not noted in Table ll. Accumulation of historical data and preparation of forecasts in a detailed matrix format would allow informed and intelligent consideration of port development and inland transportation questions. Availability of Historical Data Numerous federal and nonfederal organizations com pile and disseminate data on foreign and domestic water- borne commerce in a variety of formats. Federal agencies include the U.S. Army Corps of Engineers, Bureau of the Census, Maritime Administration, Department of Transpor- tation, Bureau of Customs, and Interstate Commerce Commission. Since 1945 the federal program of collection and publication of waterborne commerce data has been coordinated by the Office of Management and Budget (and its predecessor agency) with the objective of producing the most useful data at the least cost. Of the federal agencies, the Bureau of Customs, the Bureau of Census, and the Corps of Engineers are the major collectors and compilers. A brief description of the program of several agencies follows. Bureau of Customs The Bureau of Customs, Department of the Treasury, is the federal agency responsible for administering the tariff laws of the United States. Importers and exporters are required to file with customs officials information on waterborne trades. The data include statistics on modes, countries of origin and destination, quantities, values, and commodity classifications.

-92—- c°k £°O 8°T 7°eT £°0O¢ TeIOL €°ST c°ST s o y e 7] qea15 T°O Z°0 9FJ FIC Y320N - s°0 DT Toe 3880) yanos J1ND c°0 T°0 DFIUeTIV y3nog 9°97 DF IUeTIV Y220N A 1 j u q jo a s u e y 3 1 0 g CLOT * S L Y O d W I WYO NOUI -- OT ATAVL B I I B W U O D JO A u a u A 1 e d a q s e u T W JO n e s i n g *s*g s:a0anos TeIOL e T T e r q s n y 3seq 1ey B O F A s Y 289M eadoing u l a 3 s o y 3se0D IsS9M 3se0) 3Seq s e o T i e u y y3nos epeue) U } 3 F I 0

~93- T°0 T°0 = = = = = z°0 Z°0 - - - - - - £°S - - * ¥ % - - c°0 - - * ¥ * - = - - - *¥ *¥ *% - - L°0 - - % % % - - 9°€ - - % % % - - S°0 - - * ¥ * - - £ ° 0 _—_ _ _ —— _—_ £'0 —_ — _ z°0 - - - - Z°0 = = TO - - - - T°0 - - L’st — _ —_ —_ _*_ _T _* — _ £°0 - = = * = ¥ = T°O - - - ¥ - % - T’€ - - - * - * - T°0 - - - * - * - O'T - - - ¥ - * - L°6 - - - ¥ - * - 9°4 - - - * - * - T e I o L 3 8 3 M 3 8 9 q T e 1 j 4 U a | Te1zquayg 3 s e q D F I U e E L I V 3 s e q Y3I0N YINos yanos YIION YINOS PTW y310N SuOfIeUT {Seq puUeTIAZIUTY CL6T * S L Y O d W I FAO NOWI -- TT A d v T V L O L 38809 389M BOfAeuy YyINOS epeue) IF3FOeI YIION T W L O L BTUB2I0 BOTAJV 389m 38e0D 282M 3seo) 3seq BOTAewy YyInos epeue) 3seoD JTN4 TVLOL a d o i n g u 1 3 3 8 9 q 4 3seo0D) 3seq BOTAsMy YINoSs DFIueTIy YINos TVLOL eyTTeaqsny 3seq 1ey BIFAJV 389M a d o i n g 2 8 3 M 38B0) 38394 3880) 3s8eq eoyTzewy yInos epeue) DFIuelTIy YyIION UTSfAag/esuey 3 1 0 g

~94— 6°6E £°st = o t —_ i _* _—_ T°O - - - % - % - Z°ST - - - % - % - [BIOL 389M 389M [eaqus) [e1quay) 3s8eq DFIUeTIV 38eq yU2I0N Y I N O S y a n o s Y 3 I O N YINOoS PT Y I I O N ‘BUOTIBUTISEQ P U P T A F I U T H (d,LNO0) TIT AIEVL PTUPT FRAY JON x TVLOL GNVUS T V L O L BITAZY 389M epeue) Saye] 38015 U T S T A Q / a s u e y 3 1 0 g

-95~ Copies of the various customs forms and documents are transmitted to the Bureau of the Census, which com- piles the data under authority of the laws that make the Secretary of Commerce responsible for dissemination of trade information. Bureau of Census The foreign trade statistics program conducted by the Bureau of the Census involves compilation and dis- semination of data relating to imports and exports. These statistics serve the needs of both government and non- government users. The program includes a variety of data presented in many different formats as reports, machine tabulations, and computer tapes. The information is compiled from import entries and export declarations that importers and shippers are required to file with the Bureau of Customs. These data include valuation, country and area of origin and destination, vessels, and ports. Some of the more important data are contained in monthly vessel entrance and clearance reports. They include such information as type of service (liner, tanker, tramp), rig (motor, tug, barge, scow), customs district and port, vessel manifest, vessel name, flag, ballast or cargo, country and subdivision (or U.S. port of origin and destination), cargo type (bulk or general cargo), and vessel draft. Army Corps of Engineers The Army Corps of Engineers, which is responsible for the improvement and maintenance of the navigable waters of the United States in accordance with numerous River and Harbor Acts, is authorized to collect data on veasels, passengers, and cargoes moving on the waterways. Waterborne commerce data are collected by the Corps and published annually in a 5-part report entitled Waterborne Commerce of the United States. These publications present data on the movements of commodities and vessels at ports and harbors and on inland and coastal waterways of the United States, Puerto Rico, and the Virgin Islands. Data on foreign commerce are supplied to the Corps by the Bureau of the Census. Data on domestic commerce collected by the Corps are primarily designed to meet its admini- strative requirements. The corps also provides data for other government agencies, commercial and shipping firms, and others interested in transportation. Generally, the data compiled for domestic and foreign commerce include a

~96- 4-digit commodity listing of the import, coastwise, and internal traffic. Data are also included concerning the number and types of vessels calling and departing at each U.S. port. Maritime Administration The Maritime Administration administers programs authorized by various shipping statutes relating to ship- building, cargo promotion, and port development. These include operating-differential and construction-diffe- rential subsidy programs, ship mortgage insurance, vessel exchange, cargo preference, research, maintenance of reserve fleets, and other government aids to merchant shipping. To administer these programs, the Maritime Administration collects and compiles a variety of data on ships, bulk and general cargo tonnages (break-bulk and intermodal), individual port tonnages, and cargo values. Interstate Commerce Commission The Interstate Commerce Commission has jurisdiction over the operations, services, and rates of the domestic common and contract carriers by water, with respect to their operations on the high seas, the Great Lakes, and the inland waterways. The commission compiles annual data on the ton-miles of commodities transported by these regulated carriers. Inadequacy of Current Data Foreign and domestic waterborne commerce data collection programs currently conducted by the various federal agencies are generally not sufficient for assess- ing future port requirements, capacities, and related activities. There is a lack of cargo data to link the ocean legs of the import and export movements with the domestic or hinterland movements. Such data have been collected in the past for particular years on a one-time basis, but no attempts have been made to collect the data regularly. The Bureau of Census made a special survey in September 1972 for general cargo. The survey, jointly sponsored by the Department of Transportation and the Arny Corps of Engineers, collected information on the domestic origins and destinations of cargo moving in foreign trade by sea and by air. This had last been done in 1956. In- formation collected on the domestic movement included

~97- major modes of transportation between significant points, the distance, volume, and value. In addition, it in- cluded U.S. points designated for each state and the pro- duction and market areas. This information has been collected, processed, and stored on magnetic tape and is readily available. The report, entitled Domestie and Internattonal Transportation of U.S. Foretgn Trade: 1970, notes that the data can be used to determine relationships between ports and foreign areas and to estimate and analyze selected general cargo flows through specific customs districts or ports by designated foreign trade routes. A similar survey is being planned for bulk commodities and will be entitled Bulk Commodity Origin-Destinatton Study: 1973. The report is sponsored by the Department of Transportation and the Army Corps of Engineers and is being prepared by the Bureau of the Census. The Center for Great Lakes Studies at the Univer- sity of Wisconsin-Milwaukee has analyzed a subset of the data contained in the public-use tapes of the 1972 report and found several shortcomings, notably in the data sampling technique. The report, Analysis of Internattonal Great Lakes Shtpptng and Hinterland, Special Report No. 23, states that "The sampling procedure employed to develop the data base was biased in a mannér that prohibits valid inference for the sample to the population for any char- acteristics other than aggregate weight for ocean vessel shipments or aggregate value for air shipments." According to the Center's report, the sampling technique used for the 1972 report should not be repeated but rather "should be reconstructed to be perfectly random with each ship- ment having the same probability of selection." The report also discusses the procedure for creat- ing the Public-Use Tapes, stating that the number of errors found implies that an inadequate file-editing pro- cedure was used, leading to a conclusion that "there are enough inconsistencies in the information provided for expanding the sample weight and sample value to estimated universe values to render these items untrustworthy." In addition, the report notes that there is an inconsistency and incompatibility of port and commodity codes used by the Bureau of the Census and the Corps of Engineers that does not allow direct comparisons.

-98- The Center for Great Lakes Studies report draws the following conclusion about the 1972 Bureau of Census report: Supporters of this recent data collection effort (of the Bureau of the Census) foresaw a variety of uses including import market determination, domestic modal split analysis and specification of various hinterland characteristics. The uniqueness of this data source has already led to its use in the formulation of transportation related policies as well as in important decisions in both the public and private sectors such as investment in facilities. This wide- spread use has served to stimulate the effort that has been devoted to the preparation of this document, (Special Report #23,) Unfortunately, our analysis of these important applications, including that reported herein, is not completely valid. Recommended Forecasting Procedures In port planning it is desirable to make at least two estimates: first, a fairly short-range estimate for 5 to 10 years in order to determine immediate needs and, second, a longer range estimate for 15 to 25 years to establish the scope of future construction. At least 3 years will probably be needed to arrange financing and design and construct a new facility. After this, several years will be required for the new transportation patterns to be established. Frequently, a guide to a useful date for estimating completion will be the expected staging of some other corollary activity related to the port or waterway, such as construction of a connecting highway. Forecasting the cargo potential for a port is an arduous task that requires access to data, familiarity with methodology, and knowledge of international trade. A good forecast is more than the sum of its individual parts. Forecasting is more of an art than a science. The steps necessary to carry out a forecasting study, the data needs, and the analytical effort required

~99- are described in the following. The details may differ from port to port, but this outline and description pro~ vides a checklist for port planners. Data Collection The following types of basic information, necessary for the projection of potential port commerce, should be obtained through interviews with appropriate agencies, review of related previous studies, surveys, and question-~ nairs. Traffic of the Port and Competing Ports All available statistics should be gathered for the past 5 to 10 years on tonnages of commodity groups handled through the subject port and the competing ports. If possible, container cargo should be shown separately. Also, principal areas of origin and destination should be identified. Types of vessels generally used for each com modity should be determined. Transportation Network Serving Ports An inventory should be made of railway, high- way, waterway, and airline transportation facilities direct- ly or indirectly linking the port area and the competing ports with the inland regions. Maps should be prepared showing these routes and intermodal connections as well as any improvements in the transportation system either under construction or definitely planned. The maps permit trac- ing flows of port commerce to and from the hinterland, both at present and in the future. Freight Rates and Port Changes The selection of ports for cargo routing is based on the cost of transportation between the hinterland and the ports. Rail, highway, waterway, and air freight rates for the principal commodities to and from ports should be obtained from the carriers or organizations controlling cargo routings. lIsodopane (equal rate contour) maps should be prepared for the port and its competitors. Port handling charges are another factor influ- encing the routing of shipments. Schedules of port charges against the cargo (wharfage) and against the ships (dockage) should be obtained from the subject port and from competing ports.

-100~ Ocean Shipping Services Current schedules of vessels calling at the subject port and competing ports should be collected, to show frequency of service to and from foreign and coastal ports. Shipping rates via those services should also be obtained from principal commodity classifications. Competing Port Facilities Descriptions should be prepared of facilities at competing ports. The tabulations should include the number of ship berths for each type of bulk and specialized cargo as well as for general cargo. All special storage and handling facilities and services should be noted. The survey should include a determination of plans for expan- sion or improvement of facilities and services at the competing ports. Economic Factors Influencing Port Commerce Statistics should be collected for the port hinterland on economic factors affecting potential port commerce. Such factors include, but are not necessarily limited to, the following: population (number, distribution, characteristics); levels of income; agricultural production; mining; forestry; power output, industry (production, value added, employment). Data Analysis The collected data should be analyzed in the following ways to provide a basis for estimating future commerce and port requirements: Boundaries of Present Tributary Area Tabulations of areas of inland origin and destination for the principal commodities handled at the port should be prepared. These data would serve as the basis for a generalized map of the hinterland region served by the port. Definition of Potential Tributary Area Inland and ocean freight rates and port charges for each of the principal commodities considered potential to the port should be studied. The inland locations at which the total transportation cost would be equal through the subject port and through each competing

-101- port could then be determined. Such locations would define the boundaries of a tributary area, within which routing the subject port theoretically should be less costly than routing through other ports. The region immediately surrounding the tri- butary area, where the total costs would be approximately the same for routing through the subject port or through other ports, could be considered as a competitive tri- butary area. It is a zone in which the development of commerce through the subject port could be substantial but would depend on attractions other than transportation costs alone, such as the type and frequency of ship services, adequacy of port facilities and services, and promotion. Maps should be prepared showing the captive and competitive tributary areas for each of the principal commodity classifications. It is likely that the areas for different types of commodities will not be identical. Trends in Commodity Shipments The tonnages of principal commodities handled at the port and at competing ports should be analyzed to determine historical growth trends and possible shifts between ports. A pattern of imports, exports, and coast- wise shipments that could serve as a basis for projecting future commerce flow would emerge. Where appropriate, average annual rates of growth should be computed. Trends in Production and Consumption An attempt should be made to correlate trends in waterborne commerce with economic measurements obtained for the tributary areas or overseas market areas. For example, trends in annual soybean and soybean product shipments should bear a relationship to trends in the annual production of soybeans or to economic conditions in overseas markets. Similarly, growth of receipts of consumer products at the ports could be associated with increases in population and income levels. Evaluations should also be made of foreign markets for exports. Trends in Ship Sizes and Types Developments in the size and type of ships serving ports in the region should be reviewed in re- lation to types of commodities usually carried. Maximum

-102- draft, length, capacity, average load, and special features should be analyzed to determine trends that might affect a port's capability to receive new ships. In particular, the use of bulk carriers, container vessels, and other types should be studied for any possible effect on port commerce projections and terminal design. Projections of Potential Commerce Based on the review and analyses of available in- formation, various forecasts must be made for use in plan- ning port development. Annual import, export, and coast- wise tonnages of principal commodity types to be shipped through a port should be projected in considerable detail for the first 5 to 10 years, and in an aggregated form in 5-year intervals for the following ten or fifteen years. Commodities should be grouped according to their suscep- tibility to transport by ship type. Cargo to be carried aboard break-bulk ships should be subdivided according to handling requirements at the port, showing separately such special-handling general cargo as lumber, newsprint, heavy lift cargo, and vehicles. The compilation and evaluation of necessary data for developing forecasts of port requirements and plans for future port expansion demands large and highly trained staffs devoted exclusively to research and development. The large costs involved would preclude most ports from conducting such research on an individual basis. The federal government could assist the port industry by taking the leading role in research and data collection and making its findings and the data available to all ports, preferably through a single agency. This would eventually lead to uniform guidelines for data collection and would eliminate the inconsistencies and lack of comparability that currently exist because of the variety of federal agencies currently collecting and preparing traffic and cargo. A special port industry committee, with representation from all transportation modes, could be established to advise the government of port data needs and could also assist ports in forecasting procedures. A forecast is a function of the operating assump- tions; in effect it is "valid" under one set of competitive factors. Forecasts should be made for several sets of competitive factors and even then should be subjected to sensitivity tests. Similarly, if we assumed a handling

-103- cost of X dollars per ton, we could ask what the forecast would be if handling costs were incrementally increased by (X + AX) dollars per ton. Lastly, we must note that forecasts (and some subportions of the forecasts) must stand the test of reasonableness. Analysis should not preclude the exercise of judgment.

CHAPTER V ISSUES AFFECTING PORT DEVELOPMENT The principal variables affecting the future growth of ports are technological developments, port capacity, regulation and rates, port financing, and environmental and economic conflicts. Technological Developments Nearly all major technological developments in the maritime industry in recent years have been directed toward specialization. Ships are now designed for specific commo- dity movements, often over specific trade routes. Contain- erships are replacing older conventional or break=-bulk ships on many routes, while unitized loading (including palle- tization) is replacing hand stowage on modern break-bulk carriers, with obvious increases in efficiency. Even general cargo ships are increasingly carrying containers as part of their stowage. RoRo ships allow for more rapid loading and discharging of certain containerized cargo. LASH and SeaBee developments permit time and cost reductions at downstream interchange points. In certain instances, goods that had traditionally moved as break-bulk (e.g., sugar) are now handled exclusively in bulk. Both high labor costs and the relatively small growth in labor productivity in industrial nations are responsible for these technological innovations. The appearance of containerization with high costs for specia=- lized ships, new container handling equipment, and new terminals naturally results in the development of major container ports or load centers--one or two ports in each port range serving as the major terminul centers for most container cargo of the region. Large, fast container ships call only at these load centers. Cargo for other parts of the region (including other ports) moves by smaller -105-

-106- feeder ship, barge, rail, or truck. Load centering produces economies of scale in port and terminal operations and in vessel utilization. Container vessels are expensive, and in-port time reduces the total annual volume of cargo they can handle. Container terminals are similarly expensive, and berths, cranes, and other equipment must have frequent use to be economically practicable. Technological deve-— lopment, specialization, and the resultant load-centering will continue and must be recognized in planning ports. In less industrialized nations, fears are expressed that they may be forced to adopt containerization, even in the absence of a transportation infrastructure, in order to take advantage of technological developments. The full potential of container services is only attained when the regions at both ends of the route have reasonably well-developed internal transportation systems to serve complementary and balanced commerce. Those developing nations that have excessive unemployment and a shortage of foreign exchange are better served by a labor-intensive system than by a capital-intensive system. Economies of scale for the movement of crude petroleum have resulted in the development of tankers too large to be accommodated in most ports in the United States. The need for transshipping facilities has prompted the current interest in offshore terminals. The federal government and private industry have studied alternative types and potential locations of offshore terminals. In most cases, projected offshore deepwater terminals should not adversely affect existing ports. Rather, there is likely to be increased activity in existing ports in support of the operations of such deepwater port facilities. Port Capacity Although the capacity of any single element of a port may be expressed as an absolute number, such as containers loaded per hour by a crane or vessel transits per hour through a channel, the aggregate capacity of a port cannot be so simply described. A number of physical constraints and operating policies directly affect the capacity of a port. In addition to these constraints and policies, port capacity is also affected by the demand imposed on the port, both in terms of the volume of each type of cargo the port is expected to accommodate and the

-107- time within which this volume must be handled. The capacity of a port must be determined with proper allowances for peak demands even though in off-peak periods much of the capacity is unused. It would be possible, of course, to design a port facility so that its capacity would be fully utilized at all times. Under this situation, variations in demand would have to be accommodated by delaying ships, forcing them to wait at anchorage until vessels that arrived previously had been serviced. Also, cargo awaiting ships would be delayed or would be routed through a competing port. Although this approach to port operations would maximize the cargo handled at a port for a given set of facilities, an economic analysis incorporating both vessel cost and port facility costs would show that such an extreme case of port operations would represent a highly uneconomic use of resources. Conversely, designing a port so that vessels are never forced to wait also represents an uneconomic use of resources. As for any service opera- tion, the least total cost is obtained by minimizing the sum of the costs of service facility construction and opera- tion and the costs of ship and cargo delays. This results in a level of service at which vessels are infrequently forced to wait during peak periods. Determination of such an economic optimum point requires a complex and detailed analysis of each port. While queuing theory and other concepts can be employed for the study of individual facilities or elements in a port, the interconnections among these facilities and elements are so complex that a sophisticated time-oriented simulation procedure may be necessary to determine fully the effects of modifications in facilities or changes in operating practices on vessel delays. Evaluating the economic costs of ship delays combined with capital and operating costs of physical facilities requires simulations using as inputs varying numbers of berths, entrance channel configurations, storage capacities, and operating policies and procedures. Such analyses to determine the economic balance for a port are, of course, costly and time consuming, especially in the larger and more complex ports. No analyses of the capacity of individual ports or any detailed analyses of the existence of overcapacity at various ports or for the nation as a whole have been made in this report. On the basis of judgment and experience,

-108- however, it is concluded that under the competitive free market economy of the United States, and with recognition of the need to provide for short-term growth, there is no critical excess of port facilities in the nation. There are, at some ports, facilities that are not in use or are used for only limited periods each year. Many of these facilities are, however, obsolete in terms of current cargo-handling methods, and they would be inefficient and uneconomic to operate. That such facilities exist but are unused to their fullest extent is not an indication of overcapacity but rather is a reflection of the realities of economics in the competitive port industry of the United States. Requiring such facilities to be used and prevent- ing the construction of new facilities would increase the total economic costs of cargo movement. Regulation and Rates Although technological developments in intermodal transfer have resulted in greater potential efficiencies, optimum freight transport and interchange have been re- tarded by administrative constraints of regulatory agencies. National transportation policy should encourage the effi- cient and economical flow of goods both within the United States and between points within the nation and the rest of the world. Basis for Regulation By preventing unfair competition among suppliers of transport services, regulation is intended to preclude the development of monopolies. Meyer et al., in assessing the extent of competition in the transport industries and the probable structure of those industries if regulatory restraints were removed, assert that, "regulation is essentially a substitute for competition in the protection of the public interest, and it has developed historically in the public service industries in which competition has demonstrated its inadequacy."°! And, as Friedlaender notes: Regulation is the exception rather than the rule in the United States. Competition is considered "workable" in that it leads to a reasonably 5! John R. Meyer et al., The Economics of Competition in the Transportation Industries, Harvard University Press, 1959, p. l.