Bahamas Faces Persistently High Inter-Island Transport Costs
What happened
A market report for Eleuthera in the Bahamas underscores the continuing challenge of high inter-island transport costs. The fragmented nature of the archipelago, limited economies of scale, and inconsistent cargo schedules are cited as key drivers of high per-unit costs for moving goods. The report advises operators to consider bulk consolidation or regional "stock islands" to mitigate these expenses.
Why it matters
- A new government body, the National Trade Facilitation Committee (NTFC), has been established to reduce the cost of goods by up to one-third by diversifying trade and cutting out US intermediaries for products sourced from other regions, such as meat from Brazil. - In addition to freight logistics, the Bahamas maintains some of the highest customs tariffs in the Western Hemisphere, with an average duty rate of about 30% and a Value-Added-Tax that constitutes 45% of government revenue. - A recent external threat involved a proposed U.S. tariff of up to $1.5 million per port call on Chinese-built vessels, which comprise the majority of the Caribbean shipping fleet; it was projected this could have increased shipping costs by 50-60% before a regional exemption was secured. - The government has identified upgrades to key inter-island hubs, such as Potter's Cay Dock in Nassau, as a critical component of its strategy to improve the efficiency of trade between islands and make goods more affordable. - Third-party logistics providers offer a solution used by other luxury Caribbean resorts, which involves consolidating goods from multiple vendors at a single point, like Miami, to create full container loads and negotiate volume discounts on freight. - Other archipelagic nations like Indonesia and the Philippines are addressing similar logistics challenges by investing in Roll-on/Roll-off (RoRo) ferry services that integrate sea and land transport, and by digitalizing their supply chains with AI-based management and tracking platforms. - The country's infrastructure presents ongoing challenges that compound transport costs, including electricity rates that are four times higher than in the U.S. and limited internet connectivity on smaller "Family Islands". - For time-sensitive or smaller shipments, inter-island air travel is a primary mode of transport, with domestic flights on carriers like Bahamasair and Flamingo Air to key destinations such as the Exumas and Eleuthera costing approximately $125 to $150.
Key numbers
- In addition to freight logistics, the Bahamas maintains some of the highest customs tariffs in the Western Hemisphere, with an average duty rate of about 30% and a Value-Added-Tax that constitutes 45% of government revenue.
- tariff of up to $1.5 million per port call on Chinese-built vessels, which comprise the majority of the Caribbean shipping fleet; it was projected this could have increased shipping costs by 50-60% before a regional exemption was secured.
- For time-sensitive or smaller shipments, inter-island air travel is a primary mode of transport, with domestic flights on carriers like Bahamasair and Flamingo Air to key destinations such as the Exumas and Eleuthera costing approximately $125 to $150.
What happens next
- tariff of up to $1.5 million per port call on Chinese-built vessels, which comprise the majority of the Caribbean shipping fleet; it was projected this could have increased shipping costs by 50-60% before a regional exemption was secured.
Quick answers
What happened in Bahamas Faces Persistently High Inter-Island Transport Costs?
A market report for Eleuthera in the Bahamas underscores the continuing challenge of high inter-island transport costs. The fragmented nature of the archipelago, limited economies of scale, and inconsistent cargo schedules are cited as key drivers of high per-unit costs for moving goods. The report advises operators to consider bulk consolidation or regional "stock islands" to mitigate these expenses.
Why does Bahamas Faces Persistently High Inter-Island Transport Costs matter?
A new government body, the National Trade Facilitation Committee (NTFC), has been established to reduce the cost of goods by up to one-third by diversifying trade and cutting out US intermediaries for products sourced from other regions, such as meat from Brazil. In addition to freight logistics, the Bahamas maintains some of the highest customs tariffs in the Western Hemisphere, with an average duty rate of about 30% and a Value-Added-Tax that constitutes 45% of government revenue. A recent external threat involved a proposed U.S. tariff of up to $1.5 million per port call on Chinese-built vessels, which comprise the majority of the Caribbean shipping fleet; it was projected this could have increased shipping costs by 50-60% before a regional exemption was secured. The government has identified upgrades to key inter-island hubs, such as Potter's Cay Dock in Nassau, as a critical component of its strategy to improve the efficiency of trade between islands and make goods more affordable. Third-party logistics providers offer a solution used by other luxury Caribbean resorts, which involves consolidating goods from multiple vendors at a single point, like Miami, to create full container loads and negotiate volume discounts on freight. Other archipelagic nations like Indonesia and the Philippines are addressing similar logistics challenges by investing in Roll-on/Roll-off (RoRo) ferry services that integrate sea and land transport, and by digitalizing their supply chains with AI-based management and tracking platforms. The country's infrastructure presents ongoing challenges that compound transport costs, including electricity rates that are four times higher than in the U.S. and limited internet connectivity on smaller "Family Islands". For time-sensitive or smaller shipments, inter-island air travel is a primary mode of transport, with domestic flights on carriers like Bahamasair and Flamingo Air to key destinations such as the Exumas and Eleuthera costing approximately $125 to $150.
