Selective Enforcement occurs when law enforcers derail the course of regulation or deviate from the established objective or principle of regulation and instead execute the law and enforce regulations by discretion. - D. Chen, D. Jiang, S. Liang, F. Wang China Journal of Accounting Research

1. MARITIME SHIPPING – HAWAII
ILLUSORY PRACTICES AND PROCESSES - DYMYSTIFIED
Governor Neil Abercrombie signed Act 213, on July 11, 2011. SB98 by Senators Rosalyn BAKER,
Suzanne CHUN OAKLAND, J. Kalani ENGLISH, Will ESPERO, Carol FUKUNAGA, Brickwood
GALUTERIA, Josh GREEN, David Y. IGE, Les IHARA, Gilbert KAHELE, Ron KOUCHI, Clarence
NISHIHARA, Malama SOLOMON, Brian TANIGUCHI and Shan S. TSUTSUI.
The legislature finds: “Experience has shown that efficient, reliable, frequent, and universal water
carrier service depends on economies of scale and scope, as well as the substantial investment of
capital and other resources. A successful regulatory regime must take into account and accommodate
these realities. In reviewing applications to offer new services within the existing regulatory
environment, the public utilities commission must ensure that the entry of new services and service
providers does not erode the underpinnings of the regulatory framework or threaten future investment
in service and infrastructure in a manner that RISKS THE LOSS OF EXISTING SERVICES”.
[Emphasis Supplied]
____________________
On September 20, 2012, the Commission "issued an Interim Decision and Order that approved Pasha
Hawaii Transport Lines LLC's ("Pasha") application for a Certificate of Public Convenience and
Necessity ("CPCN").
The Interim Decision and Order authorized Pasha to operate as a water carrier of property between and
among the ports of Honolulu, Kahului, Hilo, Nawiliwili, Barbers Point, and Pearl Harbor on an interim
basis through December 31, 2013. The Commission found that Pasha's proposed intrastate operations
will foster competition in the intrastate shipping industry and provide consumers with a choice of
intrastate water carriers. Furthermore, the addition of a second water carrier of property will minimize
any potential harm or inconvenience to the public if existing services are disrupted.
The Commission also determined that there was no specific, verifiable evidence in the record that
Pasha's proposed service will detrimentally harm the public or other intrastate water carriers. The
Commission noted that while there may be some concern that certain customers and neighbor island
communities may be potentially affected by Pasha's entry into the market, such issues are difficult to
evaluate based on the theoretical projections submitted by the parties.
Under Act 213, the PUC will not be allowed to permit a carrier to serve only high-margin or
high-profit ports, or lines of service served by an existing carrier. The law also requires the PUC
to hold public hearings on these license applications. The old law gave the commission the
option of holding hearings, and the PUC chose not to conduct any in the Pasha case.
Additionally, the law prohibits the PUC from granting a license if there is evidence that a new
shipper would "diminish" Young Brothers' rate of return. Finally, interim or temporary licenses
also are now prohibited, unless water-carrier service is needed during a state-declared
emergency.
Sources: 1. Staff, Pacific Business News. Pasha-Young Bros, feud shows state at its worst. Pacific
Business News [Honolulu, Hawaii] 12 Aug 2011; 2. Lum, Curtis. Pasha: New law makes competition
nearly impossible. Pacific Business News [Honolulu, Hawaii] 05 Aug 2011.

2. BENEFICIAL INTEREST FOR ACT 213 WRONGFULLY IDENTIFIED
Many including Mr. Pasha, believed that the beneficiary of Act 213 to be Young Brothers, Ltd., who
at time was owned by Hawaiian Electric Industries (HEI) through its subsidiary, Hawaiian Tug &
Barge. This belief is erroneous and counterfactual.
IN THE INTERMEDIATE COURT OF APPEALS OF THE STATE OF HAWAII
Appeal from The Public Utilities Commission of The State of Hawaii (Docket No. 2009-0059)
CAAP-10-0000246 - October 10, 2013
<https://www.courts.state.hi.us/docs/opin_ord/ica/2013/October/CAAP-10-0000246mopada.pdf>
[Extract, Citations Omitted]
A certificate shall be issued to any qualified applicant therefor, authorizing the whole or
any part of the operations covered by the application if it is found that the applicant is fit,
willing, and able properly to perform the service proposed and to conform to this chapter
and the requirements, rules, and regulations of the commission thereunder, and that the
proposed service, to the extent to be authorized by the certificate, is or will be required by
the present or future public convenience and necessity; otherwise the application shall be
denied.
During the pendency of this appeal, the 2011 Hawaii Legislature passed Senate Bill 98,
legislation relating to water carriers that, while self-described as clarifying the legislative intent
underlying the existing requirements for issuing a Certificate, substantially and substantively
amended the procedures and requirements for the issuance of a Certificate to a water carrier
applicant. Act 213 was signed into law with a specified effective date of July 1, 2011. In
addition to establishing new notice and public hearing requirements prior to the issuance of a
certificate, Act 213 barred interim orders for Certificates, such as the one at issue herein, and
establishes new criteria for a water carrier Certificate.
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. HRS § 271G-10(e) (Supp. 2012); see also HRS §
271G-10(g) (newly prohibiting interim approval of a Certificate except in response to a state-
declared emergency).
Given the scope of the changes to the HWCA, we must determine which version of the statute
governs this appeal. HRS § 1-3 (1955) provides that “[n]o law has any retrospective operation,
unless otherwise expressed or obviously intended.”
[T]he PUC erroneously interpreted Pasha's impact on Young Brothers
The entry of a new competitor on any of our trade routes could result in a significant increase in
available shipping capacity that could have a material adverse effect on our business, financial
condition, results of operations and cash flows. - Horizon Lines, Inc. (HRZ) - SEC Form 10-K.
Date Filed: April 10, 2012

3. On August 11, [2014] George Pasha IV, the president of the California shipping
company The Pasha Group, said a new law the Hawaii Legislature passed that put limits
on who could ship cargo among the Islands would put a local division of the company,
Pasha Hawaii Transport Lines, out of business. Pasha's prediction came true Jan. 1 when
the company halted its interisland shipping service. [Emphasis Supplied]
Act 213 put stringent new rules in place for the Hawaii Public Utilities Commission as it
decided whether to distribute licenses to shipping companies. Among the requirements,
Act 213 forbids the commission from issuing a license to a carrier unless it could prove
that other carriers — in this case, Young Brothers Ltd. — weren't meeting the state's
interisland shipping demands.
On Jan. 2, the Public Utilities Commission issued a 37-page ruling that dismissed
Pasha's application for a certificate of public convenience and necessity. In the ruling,
the commission said Pasha did not file the necessary documents to amend its original
application to address the new requirements. “We have enjoyed doing it but
unfortunately, it didn't work out for us to continue,” said Emily Sinclair, Pasha
spokeswoman.
Source: “Pasha says 2011 law made it impossible for Hawaii regulators to allow interisland service”
By Bill Cresenzo. Pacific Business News, Jan 9, 2014
<https://www.bizjournals.com/pacifc/blog/2014/01/pasha-says-2011-law-made-it-impossible.html>
____________________
HORIZON LINES to be broken up, SOLD TO MATSON, Pasha
By Chris Dupin, American Shipper, November 11, 2014
<https://www.freightwaves.com/news/horizon-lines-to-be-broken-up-sold-to-matson-pasha>
____________________
SELECTIVE ENFORCEMENT occurs when law enforcers derail the course of
regulation or deviate from the established objective or principle of regulation and
instead execute the law and enforce regulations by discretion.
“SELECTIVE ENFORCEMENT OF REGULATION”
By Donghua Chen, Dequan Jiang, Shangkun Liang and Fangping Wang
China Journal of Accounting Research, Vol. 4, Issues 1–2, June 2011, Pages 9-27
<https://www.sciencedirect.com/science/article/pii/S1755309111000037>
<https://www.sciencedirect.com/science/article/pii/S1755309111000037?via%3Dihub>
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