BIG NAME: Matson imports the majority of goods to Hawaii.
Photo: Emily Metcalf

Matson Shipping Cuts Oil Surcharge by 2 Percent After Oil Prices Drop 19 Percent Since May

Hawaii-based Alexander & Baldwin (NASDAQ:ALEX) announced that the company has lowered its oil surcharge by 2 percent points for its shipping cargo company, Matson.

The company has been criticized for increasing its oil surcharge to 47.5 percent this year.

The 2 percent drop comes as the nation’s crude oil price is down to $81 or down 19 percent since May.

The company said the drop in its oil surcharge will save customers between $60 and $100 per cargo container.

Here is its letter to customers:

Subject:  Matson Decreasing Fuel Surcharge by Two Percentage Points for Hawaii, Guam/CNMI and Micronesia Services

Dear Matson Customer: As a result of recent declines in bunker fuel prices, Matson announced today that it is decreasing its fuel surcharge by two percentage points, from 47.5% to 45.5% for its Hawaii service, and from 49% to 47% for its Guam/CNMI and Micronesia service, effective August 28, 2011.

“We are pleased to be able to pass this decrease along to our customers, which for the most part represents a reduction in shipping costs ranging from $60 to $105 per container,” said Dave Hoppes, senior vice president, ocean services.  “Sustained high fuel prices have made 2011 a very challenging year for many businesses. Transportation companies have been particularly hard hit, with fuel consumption an unavoidable and significant component of operating costs.  In addition, the price for bunker fuel, which is the type of fuel consumed by most ocean carriers, has risen faster over the past year than crude oil.  While we are encouraged by the recent moderation of bunker fuel costs, allowing us to make this decrease, they have not mirrored the recent downward movement of crude oil prices; bunker fuel remains at unusually high levels, exceeding the cost of crude oil.  Matson has made a practice of giving 30 days notice for upward rate adjustments, but as with previous decreases, we are passing on this downward adjustment to our customers as soon as possible. We will continue to monitor fuel costs and adjust the surcharge accordingly.”

Hawaii Reporter has written a series of articles examining Matson’s oil surcharges and how these track oil prices.

Experts have questioned whether the company is overcharging its customers.

Since 1997, Matson has filed rates at the Surface Transportation Board (STB), a federal agency that primary oversees railroads.  The Surface Transportation Board legally has some oversight over the rates to and from Hawaii. Under STB regulations, Matson’s rates are deemed reasonable if they do not increase by more than 7.5% in a given year.

The intent of the law was to allow competition to regulate rates and presumably keep rate increases below the 7.5% threshold. However, U.S. Jones Act limits competition in the islands. It says that only American flagged, manned and built ships may operate between American ports. The result is that only two companies, Matson and Horizon, control all the Jones Act containerships in the Hawaii trade.

However, even the 7.5% limit appears to be ineffective. As Hawaii Reporter’s calculations indicate, Matson’s total rates including surcharges have increased more than 20% on average since last year. Yet, there has been no investigation by the Surface Transportation Board.

A Surface Transportation Board spokesperson told Hawaii Reporter essentially the way it works: Matson files its rate increases with the board and approvals are accepted automatically. He confirmed that there is no investigation into Matson rate increases unless there is a complaint filed with the agency.

Alexander & Baldwin Inc. is reporting an $18.7 million profit this quarter. The company operates Matson and brings an estimated two-thirds of Hawaii’s container ship freight.

Proposed Regulation Would Force Businesses to Disclose Expenditures Made to Battle Union Organization

Lowell Kalapa, president of the Tax Foundation of Hawaii, said a requirement that is being proposed before the National Labor Relations Board will force businesses to report money they’ve spent to battle labor union leaders who are trying to organize their shops.

Kalapa questions why businesses should be required to disclose that information.

If political leaders want to create jobs, they need to cut regulations that are not related to health and safety, and they need to get out of the way of business, Kalapa said.

He added that if this does not happen, the nation’s economy will continue to stumble and struggle.

See his full report in Hawaii Reporter today.

Global Horizons Hit with $2 Million Judgment in Washington Case

Mordechai Orian, the CEO of Global Horizons, is fighting accusations that his company was involved in an international human trafficking scam.

Orian has denied these allegations, which involve workers coming from Thailand to Hawaii and other states.

But he is facing other costly legal actions including a recent ruling by the 9th Circuit Court of Appeals that awards a $2 million judgment against him to Yakima Valley farm workers in Washington State.

Global Horizons provided 175 temporary workers through the federal H-2A guest-worker program in 2004, but an estimated 600 workers claimed they were displaced.

Orian told Hawaii Reporter that he had no way to defend his company against illegal workers accusations.

The Israeli national said America’s laws are “twisted.”

Here is Orian’s full statement to Hawaii Reporter:

“I had no way to defend the company under this circumstances so the farmers were the only one who was arguing the case. This that to show you how twisted the legal system is, that illegals apply for H2A visas.  The state of Washington refer illegals to a job that must be done only by legals. We were never allowed to question their legality.  And now a court awarded illegals money.  How absurd it is – if you hire illegals then you will be prosecuted, but if you don’t hire them then you are liable for monitory compensation. That shows you how right hand does not work with left hand. How attorneys can twist the law and get money for “locals.” So where are those American local workers who want to work on a farm? Show me 600 of them. Why can no one find them? When we need them?”

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