The increase is in addition to a 1.75 percent fuel surcharge that Matson put into effect Sunday.

Hikes in the cost of shipping are felt throughout the islands since the vast majority of goods imported into the state come by ship.

One reason Matson needs the money, the company said, is a 10.7 percent increase in its labor costs that it will incur in the first year of a three-year West Coast dock labor contract signed recently with the ILWU.

It also needs higher income to help cover ongoing investments in improvements in its fleet, terminal and other equipment, Matson said. The company said it has spent more than $600 million on such improvements in its Hawaii service in the past 10 years.

C. Bradley Mulholland, president and chief executive of the Alexander & Baldwin Inc. subsidiary, said Matson rate increases continue to lag well behind the increases in the Honolulu and U.S. consumer price indexes. In the last 10 years, the Honolulu consumer price index rose 50 percent while Matson's rates, including the fuel charge, rose 32 percent, the company said.

The recent fuel surcharge, made in response to a 32 percent hike in fuel costs over the last 12 months, is specifically related to fuel and could change as fuel costs change and even disappear of fuel costs fall, the company said.

A spokesman at competitor Sea-Land Service said the company had just heard about the rate increase this morning and would not comment on whether or not it would follow.

The last time Matson had an across-the-board rate increase like the one announced today was 3.8 percent in January.

"Matson has implemented a number of across-the-board cost reduction initiatives in 1996 that are designed to help the company control rising costs without sacrificing the quality and stability of our service," Mulholland said.

The company said it notified the U.S. Surface Transportation Board today of the rate increase. Current rate-making processes require only that notification and there is no review process prior to the rates going into effect.