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Some products will soon get pricier with shipping rate increase

Businesses brace for Young Brothers invoices in already challenging times

Residents soon will see prices increase on certain products in the wake of the 46 percent emergency rate hike approved by the state Public Utilities Commission for interisland shipper Young Brothers that took effect this month.

Although some local businesses have yet to see updated invoices, Young Brothers confirmed Tuesday afternoon that as of Sept. 1 its emergency rate increase of 46 percent went into effect — and the company returned to its pre-COVID-19 shipping schedules.

Young Brothers had been allowed to reduce port calls — including to Maui County ports — as a result of reduced revenues from the COVID-19 pandemic.

David Marrs, owner of Marmac Ace Hardware stores in Kahului and Maui Lani, said he will have to raise prices on products from about three or four off-island vendors. Top of mind were sickles ordered from the Big Island.

“When we get the order in, I will start seeing the increase of freight charges,” Marrs said. “That’s when we will have to increase our percentages, our margins.”

He added that about 95 percent of Marmac Ace products come directly from the Mainland through shipper Matson.

Marrs said the Young Brothers increases will stretch the dollar, especially in an already difficult time.

“Some are saying that will put a lot of businesses out of business,” he said.

Warren Watanabe, executive director of the Maui County Farm Bureau, an organization comprising farmers, ranchers and other agricultural businesses, said Tuesday afternoon that the bureau is “very disappointed” the rate hike was approved. The increase will “severely impact” farmers and ranchers on the Neighbor Islands, who ship products across the state.

“To compound this rate increase, agriculture is struggling with the coronavirus and the drought,” Watanabe said. “We appreciate the stipulation that Young Brothers continue LCL (less than container load) cargo, return to the pre-COVID shipping schedule and improve customer service.

“A long-term solution or business strategy needs to be developed as the current process for rate increases is unacceptable.”

Young Brothers, the cargo lifeline for the Neighbor Islands, has been floundering for months, citing declining cargo volumes and rising operating expenses exacerbated by the pandemic. In May, Young Brothers sought and was granted by the PUC a reduction in port calls, including one fewer to Kahului and Kaunakakai harbors.

In recent months, the shipper sought $25 million in CARES Act funding from the state Legislature, which was turned down. It also sought third-party financing to alleviate its liquidity crisis but was unsuccessful.

The PUC last month granted Young Brothers’ July request to increase revenues by about $27 million through rate hikes — about 46 percent. The new rates apply to all freight rates and freight-related rules on all cargo sailings.

In making its ruling, the PUC noted that “Young Brothers’ financial issues, including rising operating expenses and declining cargo volumes and revenues, began well before the current economic downturn.”

To allay its concerns, the PUC also set conditions, which included the pre-COVID-19 schedule restoration.

The Young Brothers updated shipping schedule includes three-times-per-week trips between Honolulu and Kahului; two-times-per-week trips between Honolulu and Kaunakakai, Honolulu and Hilo, Honolulu and Kawaihae, Hawaii island, and Honolulu and Nawiliwili, Kauai; and once per week between Honolulu and Kaumalapau, Lanai, according to the shipper’s online schedule.

The company said Tuesday afternoon that the emergency rate request does not include a rate of return or profit of any kind. 

“This temporary rate increase was Young Brothers’ last resort after exhausting all other avenues of relief because we know any rate increase has a real impact on our customers and communities,” Jay Ana, Young Brothers LLC president said in a statement. “The new rates set by the Public Utilities Commission are a critical lifeline that will allow us to break even as we work to build a strong and bright future for Young Brothers.”

* Kehaulani Cerizo can be reached at kcerizo@mauinews.com.

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