Kaua‘i businesses are bracing for another huge rate hike in shipping goods from island to island just four years after Young Brothers won a 46% emergency rate increase.

Now, the freight service company wants state regulators to approve a 27% hike on cargo transportation fees.

With Young Brothers’ request pending approval by the Public Utilities Commission, local businesses say this could bring them to a point where “soon it’s not going to be workable,” as Aloun Farms President Alec Sou put it.

“It’s coming to a breaking point,” he said.

Shipping costs make up a significant share of the retail price of most goods, especially on neighbor islands. Business owners say with costs rising on so many fronts they’re already operating on tight margins. Higher shipping fees would force them to choose between charging customers more or losing profits — or both.

Young Brothers attributes its proposed rate increase to rising operating expenses, a slump in shipping volumes and badly needed investments in upgrades. The company expects its proposed rates would generate $26 million in revenue, a boost it plans to use to purchase new barges and tugboats while offsetting the impact of lower demand for its service since the Covid-19 pandemic.

Businesses in favor of the proposed rate hike argue the vital service Young Brothers provides is well worth saving. In public testimony, executives from Island Movers and Bank of Hawai‘i cite fears that it could become increasingly difficult to move essential goods across the state if the freight service can’t pull itself out of financial strain. Those who oppose higher fees point to the runaway cost of doing business in Hawaiʻi and the ways pricier essential goods impact local families.

“By the time something like cabbage finally gets to the shelf it’s going to be more expensive,” Earl Kashiwagi, owner of the Kauaʻi fruit and vegetable wholesaler Esaki’s Produce, said. “Any time you add on to the cost, that gets passed on to the consumer.”

Young Brothers runs what is essentially a monopoly barge service for the Hawaiian Islands. The service is crucial to neighbor island economies where its fleet of barges are the sole supplier of everything from fresh milk and livestock to building materials and vehicles.

The company needs permission to raise its rates from the Public Utilities Commission, which decides how much utilities can charge customers. The approved rate is designed to guarantee a certain level of revenue and profit. A decision by the PUC is expected in September.

A review of Young Brothers’ request is also underway at the state Division of Consumer Advocacy, which represents consumer interests before the PUC.

Michael Angelo, the state’s Consumer Advocate, said he’s concerned about Young Brothers asking for another dramatic rate increase just four years after its last one.

“Their financial condition at the moment is not good,” he said.

Angelo said he plans to come out with his position on the rate hike on April 21.

Young Brothers executives were not available to be interviewed for this story. Kris Nakagawa, the company’s vice president for legal and external affairs, said in a prepared statement that without immediate relief, Young Brothers will no longer be able to cover operating expenses or make investments to maintain service reliability. At current rates, the company’s projected losses for 2025 would total nearly $18 million.

On Kauaʻi, a public hearing on the proposed shipping rate increase is scheduled for 5:30 p.m. Monday at the Lihu‘e State Office Building. Last week, the PUC held public hearings on Oʻahu and the Big Island. The regulator is set to host more hearings on Maui on April 30 and Lānaʻi on May 1. A public hearing date for Moloka‘i has not been announced.

‘Double Whammy’

Aloun Farms, one of Hawaii’s most prolific vegetable producers, started farming on Kauaʻi in early 2022. With new plans to establish a Kauaʻi dairy, the company has been credited with starting a small revival in the languishing West Kauaʻi agricultural region. Aloun started with 300 acres on the Garden Isle and now has 2,500 acres, as well as a 3,000-acre Oʻahu footprint.

Most of the vegetables harvested by Aloun Farms on Kaua‘i must be shipped to the much larger Honolulu market. Despite the added transportation costs, the company’s Kauaʻi venture pencils out because leased farm land on the Garden Isle is cheaper and easier to come by than it is on land-crunched Oʻahu. 

But if Young Brothers’ rates go up, the business benefits offered by Kauaʻi may no longer outweigh the expense of interisland shipping, Sou said.

“We can’t keep continuing to raise the rates like this,” he said. “It’s going to make it so much harder and it’s already difficult.”

Eric Tanouye, president of the Hawai‘i Floriculture & Nursery Association, said the boutique industry of fresh cut flower and blooming plant growers is struggling to absorb cost increases for nursery and shipping supplies. Higher freight fees would only compound the problem.

Some small Hawaiʻi growers, he said, may be unable to survive. The association has a couple dozen member plant growers on Kauaʻi and more than 300 statewide.

“We’re still recuperating from the last rate increase that Young Brothers got,” Tanouye said.

Now with tariff threats and market turbulence causing economic jitters, Tanouye said he anticipates consumers will pull back spending on specialized plants and flowers — affordable luxuries that are often first to go when consumers tighten their wallets.

“If the rate is approved, it will be like a double whammy,” Tanouye said. “We feel due to tariffs and the global concerns before us, it is not the time to be raising these kinds of high rates in Hawaiʻi.”

Young Brothers made sweeping shipping rate increases at the onset of the Covid-19 pandemic after alerting the PUC that it was struggling to stay in business. The commission allowed the company to raise shipping rates by 46%.

Former PUC Chairman Jay Griffin has said the rate hike was “incredibly painful” for consumers but the commission had no other choice to prevent an essential service from going bankrupt. 

An audit later found that Young Brothers’ money problems started long before the pandemic hit. That finding led the PUC to appoint an independent observer to oversee a restructuring of the company.

Since the pandemic, Young Brothers said its operating costs have soared 17%. Meanwhile, interisland cargo volume is down 13% from 2019 to 2023. The company said it has recently invested $120 million in critical fleet and harbor infrastructure.

Now, in addition to improving its financial standing, Angelo, the Consumer Advocate, said he wants to see Young Brothers improve the quality of its service.

At a recent public hearing in Hilo on the proposed rate change, Angelo said farmers are concerned their product had been left sitting at the dock overnight before getting shipped out or arriving damaged to Honolulu.

Hawaiʻi’s Changing Economy” is supported by a grant from the Hawaiʻi Community Foundation as part of its work to build equity for all through the CHANGE Framework.