MARITIME SHIPPING HAWAII

SURFACE TRANSPORTATION BOARD (STB) HAWAII PUBLIC UTILITIES COMMISSION

(Hawaii State PUC)

ZONE OF REASONABLENESS

ACT 213

MATSON NAVIGATION

HORIZON LINES – HAWAII

YOUNG BROS. and HAWAIIAN TUG & BARGE

Companies Of SALTCHUK & FOSS MARITIME

CLEAR AND PRESENT

DANGER

ZONE OF REASONABLESS

ACT 213

SURFACE TRANSPORTATION BOARD

[ STB ]

ZONE OF REASONABLENESS

ACT 213

HAWAII STATE PUBLIC UTILITES

COMMISSION [ Hawaii State PUC ]

STB ZONE OF REASONABLESS

(1) IN GENERAL. — For purposes of this section, a rate or division of a motor carrier for service in noncontiguous domestic trade or water carrier for port-to-port service in that trade is reasonable if the aggregate of increases and decreases in any such rate or division is not more than 7.5 percent above, or more than 10 percent below, the rate or division in effect 1 year before the effective date of The proposed rate or division.

(2) ADJUSTMENTS TO THE ZONE. — The percentage specified in paragraph (1) shall be increased or decreased, as the case may be, by the percentage change in the Producers Price Index, as published by the Department of Labor, that has occurred during the most recent 1-year period before the date the rate or division in question first took effect.

YOUNG BROS. APPLICATION TO HPUC - ZONE OF REASONABLENESS

In concept, the practice will be similar to the federal procedure authorizing interstate

water carriers regulated by the Surface Transportation Board to file for a rate change

provided it is within a zone of reasonableness without having to secure Board

approval each time a rate change is sought. See 49 USC 13701.

Competition has drastically increased over the past several years primarily from the

interstate carriers, including two potentially new interstate carriers entering the

Hawaii market in the next few years. These carriers are not regulated by the

Commission but are loosely regulated by the Surface Transportation Board, under

the U.S. Department of Transportation. This Application will enable YB to compete

more effectively by leveling the playing field for all carriers transporting to the

Neighbor Islands.

Hawaii State PUC Docket No. 2001-0255 [Emphasis Supplied]

Hawaii State PUC Decision YOUNG BROS.

APPLICATION - ZONE OF REASONABLENESS

THE COMMISSION ORDERS:

The Zone of Reasonableness Program for Young Brothers is

terminated, effective from the date of this Order, as inconsistent

with the public interest.

HPUC Docket No. 2001-0255 [Emphasis Supplied]

STB WATER CARRIER REGULATION

• STB has authority over carriers operating between Hawaii and the US 48 states.

• STB has no authority over carriers operating solely within the noncontiguous states or territories themselves.

Hawaii State PUC

WATER CARRIER REGULATION

The Commission regulates four water carriers: Young Brothers, Limited

(“Young Brothers”), a provider of inter-island cargo service between all

Major islands; Sea Link of Hawaii, Inc. (“Sea Link”), a passenger and cargo

carrier providing water transportation services between the islands of Maui

and Molokai; Hone Heke Corporation (“Hone Heke”), a passenger and cargo

carrier providing water transportation services between the islands of Maui

and Lanai; and Pasha Hawaii Transport Lines LLC (“Pasha”), a provider of

cargo Service between the ports of Honolulu, Kahului, and Hilo with

Authorization to make calls to Nawiliwili, Barbers Point, and Pearl Harbor

upon a customer’s request.

YOUNG BROS. – MATSON - HORIZON

Horizon and Matson cargo moving on Young Bros. is not subject to Hawaii State PUC regulation.

Horizon does not have its own interisland vessels and uses Young Bros. to transship virtually all its neighbor island cargo.

Matson operates an interisland (intrastate) fleet of three barges, which includes two container barges and one Ro/RO barge. Matson moves most of their neighbor island cargo on their own equipment.

The Hawaii Shippers Council, 2013

MATSON CARGO MOVED

INTER-ISLAND, INTRASTATE

ON MATSON EQUIPMENT

IS SUBJECT TO REGULATION BY

HAWAII STATE PUC

Matson has no Tariff for

Inter Island, Intrastate

Water Carrier Service Filed

and Approved by The

Hawaii State PUC

INFORMATION CURRENT AS OF: January 21, 2014

ACT 213

The commission shall not make a finding of public convenience and necessity nor issue a certificate if the evidence in the record indicates that the issuance of the certificate would diminish an existing water carrier's ability to realize its allowed rate of return or if the certificate would allow an applicant to serve only high-margin or high-profit ports or lines of service that are currently served by an existing carrier.

Governor Neil Abercrombie, July 11, 2011, Act 213, effective as of July 1, 2011

ACT 213

APPLIES TO

ALL APPLICATIONS FOR

INTER-ISLAND WATER

CARRIER SERVICES

FILED AFTER JULY 1, 2011