WAILUKU, Maui — A cargo shipping rate increase is expected to raise prices on some products moved between the islands before they reach customers.
The 46% increase by interisland shipper Young Brothers LLC took effect this month.
Although some businesses have yet to see updated invoices, Young Brothers confirmed Tuesday that its emergency rate increase has gone into effect.
The company also returned to shipping schedules used before the coronavirus outbreak, which was a condition of the rate approval by the Hawaii Public Utilities Commission.
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 because of the change.
“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.”
The rate hike will stretch budgets during an already difficult time, he said.
“Some are saying that will put a lot of businesses out of business,” Marrs said.
The utilities commission last month granted Young Brothers’ request for the emergency rate increase, which is expected to increase the company’s revenue by $27 million.
Young Brothers predicted a $30.4 million increase was necessary to break even financially and requested $25 million in federal coronavirus recovery funds, but state legislators rejected the proposal.
The emergency rate will not provide a profit, the company said.
The utilities commission noted in its ruling that “Young Brothers’ financial issues, including rising operating expenses and declining cargo volumes and revenues, began well before the current economic downturn.”
Warren Watanabe, executive director of the Maui County Farm Bureau, said the commission’s decision to approve the higher rate will “severely impact” farmers and ranchers who ship products across the state.
“A long-term solution or business strategy needs to be developed as the current process for rate increases is unacceptable,” Watanabe said.