U.S. Customs and Border Patrol wins one against American fish-shipping companies for violating antiquated Jones Act

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Two seafood shipping companies have settled a lawsuit challenging penalties and fines levied by U.S. Customs and Border Protection for violating the Jones Act, a more than 100-year old law requiring merchandise be transported by U.S. flagged vessels between U.S. ports.

An exception to the U.S. flagged vessel requirement allows seafood from Alaska to be transported to the mainland U.S. if it travels via Canadian rail. 

The companies challenged the penalties and fines in the U.S. District Court of Alaska, saying they did not violate the Jones Act while transporting seafood from Alaska to the mainland U.S. because it was “transported” by Canadian rail.

According to court documents, Kloosterboer International Forwarding LLC (KIF) and Alaska Reefer Management LLC (ARM) arranged transportation and related services to move frozen seafood from Alaska to the East Coast via ocean shipping. For over a decade, the companies moved seafood from Dutch Harbor, Alaska, to a port in New Brunswick, Canada, on foreign-flagged vessels. 

Once in Canada, KIF arranged for the seafood to be offloaded from the vessel onto trucks in the port.

The trucks were then driven onto a flatbed rail car on the Bayside Canadian Railway, a roughly 100-foot length of railroad track located entirely within the Port of Bayside, where they rode the length of the rail and back before being driven off the train cars and proceeding directly to a border crossing in Maine for final transport to the mainland U.S. 

The Bayside Canadian Railway was specifically built and exclusively used to move the seafood to get around the Jones Act by using the rail in Canada.

Customs and Border Patrol began investigating the companies’ use of foreign-flagged vessels to transport merchandise in this manner, and decided there was a violation because ths short 100-feet of rail didn’t meet the Canadian rail exception. Several penalty notices were issued, and the companies responded with a lawsuit agains the federal government, claiming they were within the letter of the law and the penalties were unlawful.

The parties filed for summary judgement in the U.S. District Court of Alaska, and the Court ruled the companies’ utilization of the BCR for part of the transport of seafood from Alaska to the mainland U.S. was unlawful because there was no actual “transportation” of goods being done, which is a requirement to meet one of the exceptions under the Jones Act. 

A settlement agreement was finalized between the companies and the U.S. in January. The agreement requires KIF and ARM to pay $9.5 million to the U.S. The companies also stopped using the BCR to transport seafood to the U.S. after this ruling.

“This is the second largest settlement of a case brought under the Jones Act in the history of our Nation,” said U.S. Attorney S. Lane Tucker for the District of Alaska. “Our prosecutors and law enforcement partners did a tremendous job successfully investigating and litigating this complex case. Our office will continue to dedicate resources to ensuring the laws in place to protect fair maritime commerce are followed by all industries in Alaska.”

“The resolution of this case sends a clear signal that CBP will use its law enforcement powers to detect and deter schemes that are designed to circumvent laws – such as the Jones Act — which are intended to protect U.S. industries,” said AnnMarie R. Highsmith, Executive Assistant Commissioner, Office of Trade, U.S. Customs and Border Protection.

17 COMMENTS

  1. What kind of idiot at CBP claims victory when prosecuting transportation to allow commerce between US states when they can’t stop people from walking into the country at will at the borders?

  2. It’s amazing the lengths that are gone to in order to satisfy law that is no longer needed. First we no longer build vessels capable of transporting goods on the US because our regulations all but shut the ship building industry down. To meet the requirements of the Jones Act these vessels would need to be owned by U.S. citizens, but the world doesn’t operate in a bubble we have international trade on a level not considered when the Jones Act was written, the vessels that transport goods in the modern world are generally multinational corporations not individuals.

    The Jones Act requires goods transported by water between U.S. ports be done so on US built vessels, owned by U.S. citizens, and crewed by U.S. citizens…but isn’t Canada a different country than the US, isn’t the port in New Brunswick, Canada a foreign port and thus not be a US port? So these companies, since they can’t buy a ship built in the US, owned by US citizens, crewed by US citizens ship their goods through the Panama Canal land the goods in Canada, build a rail line, and transport the goods across the border to the US. Now what’s going to happen, do they need to ship the goods to a different foreign country unload it there, load it on a nother vessel and then transport it to a US port? Why not just get rid of the Jones Act so that we can ship goods from US port to US port and support jobs at US ports instead of forports like the one in New Brunswick, Canada?

  3. Well, 3 consecutive articles here on MRAK, who is shipping seafood, the federal subsistence board is racist, and property taxes are unfair in Juneau. Still waiting for coverage of the real news that interests most Alaskans, so I’ll go ahead and give it now. After the final day of the second special legislative session, all the legislators boarded flights out of town, leaving behind a budget that once again stole most of the PFD for their political donors. Cowardly Dunleavy signed it.

    Prove me wrong. Hah!

    • Thank you for sharing this Natural Alaskan! I am pretty sure that the plan was for the PFD to be totally annihilated within four years. We gave up our mineral rights and now that “trade off” is being stolen from us. The globalists had a plan and they are carrying it out. Interesting times we live in.

      • The people in the lower income levels lose the most when the legislature pays for all of Alaska’s “needs” by taxing every Alaskan 1/2 to 3/4 or more of their PFD. Children down to one year old often with no other “income” are taxed at the highest level. The residents in the upper income levels can easily go without that 2 or 3 thousand dollar “taking.” AND, they are the ones who can hire lobbyists or do their own lobbying for this tax system to continue. The education industry spends millions of dollars every year influencing the legislature and any prospective candidate for the legislature to keep the status quo. How many years will it be before the Alaska Legislature passes a real income tax so that they can feel good when they use that to finance a PFD?

  4. It seems to me that you have an obvious bias against the “Jones act”. When it is the Jones act which for over 100 years has thankfully protected America’s commercial maritime trades, fisheries, jobs, and industries. It is a law that absolutely should stay in place, and be enforced. There is nothing Antiquated” about it !!!.

    • The Jones Act does little more than add to the cost of doing business in AK. There are not enough transport vessels made in US shipyards to matter, yet this act costs each and every Alaskan about $10,000 per year. That figure is from a report by the Alaska Policy Forum many months ago. Yes, I, too, am biased against this law outdated law because it has screwed over the citizens of my home for longer than I’ve been here: My entire 63 years.

      Go back to where you came from….

  5. Well, DOJ in Alaska should also look carefully at the North Pacific Fishery Council and their recommendations and work for/to Trident and their umbrella companies. China raises its ugly head in our waters and companies in many ways. DOJ Alaska needs to do their work where they are, in Alaska. China is like the underground moles of every enterprise they can get into.

  6. The Jones Act is far more complicated than ideologues would have us believe. The factual statements made in the article are true; the Jones Act requires that cargo shipped between U.S. ports be on U.S.-flagged vessels which were built in the United States, are owned by U.S. citizens and (mostly) crewed by U.S. citizens. Many in Alaska (and Hawaii, Guam, Puerto Rico, etc.) believe that we are unduly burdened by the Jones Act as shipping goods on U.S.-flagged ships is more expensive than foreign-flagged vessels but that is somewhat of a myopic view.

    First of all, ocean shipping companies don’t just compete with other ocean shippers – in a completely free market they would also compete with U.S. railroads and trucking companies for the movement of freight between coastal markets. A complete repeal of the Jones Act would therefore not only impact the (very small) market for U.S.-flagged ships but could, in theory, allow foreign-flagged vessels to undercut American railroads and truckers as well.

    Second, the Jones Act was passed in 1920 in the aftermath of WWI and one of its primary goals was to ensure a sufficient domestic shipbuilding capacity in the event it was needed for wartime production. Whether it actually accompishes this goal in the present day is certainly a topic for discussion, but the intent is an important one for national security.

    Finally, like it or not Alaska is part of a country called the United States of America. Being part of a country means that, sometimes, policies must be enacted or maintained which benefit the country as a whole even if certain parts of the country are adversely affected.

    The Jones Act is certainly a topic worth discussing and I’m sure there are ways to modify it to better fit today’s economy, but an outright repeal would not be in the national interest in my opinion. At that point, why not allow Mexican truckers to compete against Americans? Why not allow Chinese airlines to fly domestic routes?

  7. Hmmmm… Wasn’t the Jones Act supposed to be repealed for Alaska as part of the Statehood Act..? Yet another broken promise with the feds. This and other broken promises created the Alaska Independence Party.

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