American Seafoods could continue the “Canadian Rail” route of the Jones Act
A federal judge has given the green light for American Seafoods Company to resume its foreign-flagged freight shipments between U.S. points – at least until litigation over a series of alleged Jones Law violations is over. The order will deliver approximately 37 million pounds of the company’s frozen seafood to customers on the US east coast.
For more than a decade, American Seafoods has delivered its Alaskan fish to customers on the east coast of the United States using foreign flag chartered vessels, acting through its subsidiary Alaska Reefer Management. These ships are loaded at Dutch Harbor and transit through the Panama Canal and around the east coast to the port of Bayside, Canada. At Bayside, the cargo is unloaded into truck trailers for delivery in the eastern United States.
If the trucks carrying this fish entered Maine directly, the entire arrangement would be prohibited by the Jones Act, which prohibits the use of foreign vessels to transport goods between points in the United States. However, the “Bayside route” benefits from an obscure clause in the Act – the “third condition” – which permits the use of foreign flag vessels if a “direct route on” a Canadian rail line is also involved in the delivery. .
To get through this little-known loophole, every truck of fish at the Bayside Terminal is driven up a ramp and onto the only train of the “Bayside Canadian Railway” – a 100-foot stretch of track with two cars and no destination. A small bypass motor pulls the train all the way to the bottom, then pushes it back up the ramp. The truck then descends on the same ramp, to Route 127 and across the border from Maine to Calais, completing a 7,500 nm foreign flag expedition between two American points.
A truck makes a “third condition” compliance trip aboard the Bayside Canadian Railroad in Bayside, New Brunswick, 2015 (Brian Golding / US CBP)
In mid-August, U.S. Customs and Border Protection sent notices of violation to American Seafoods, Alaska Reefer Management, Terminal Operator Kloosterboer, and a number of reefer owners. flying a foreign flag, alleging multiple violations of the Jones Act over a period of several years. In total, those fines amounted to around $ 350 million – the largest Jones law enforcement measure on record.
Alaska Reefer Management and Kloosterboer quickly filed a complaint against CBP. They have applied to a federal court in Anchorage for an injunction prohibiting further fines, which would allow them to complete delivery of the fish in their foreign-flagged transportation pipeline. They argued that the potential threat of new Jones Act penalties was preventing them from shipping millions of pounds of their product, interfering with the supply of affordable pollock for school meals and feeding programs.
U.S. District Court Judge Sharon L. Gleason agreed on Sunday and ordered CBP to refrain from any further fines or enforcement actions related to the Bayside Road until the case is fully resolved. The order allows Alaska Reefer Management and Kloosterboer to resume loading the fish onto foreign-flagged vessels in Alaska, unload it in Canada, and transport it to Maine, without fear of additional penalties.
“Without immediate injunction, companies dependent on [Alaska Reefer Management’s] The supply chain is likely to temporarily close factories, jobs are likely to be lost, and the supply chain for USDA food banks and school lunch programs is likely to be disrupted, ”wrote Gleason.
Gleason also raised questions as to whether CBP changed its interpretation of Jones Law without following the proper rules of procedure. CBP is required to file a notice in the Customs Bulletin if it changes course on an existing interpretation of the law, giving affected parties 30 days to comment. The agency has already approved other “Canadian rail” deals in New Brunswick, and Alaska Reefer Management maintains that its Bayside route is “essentially identical” to previous (approved) rail compliance mechanisms – allowing ARM to give advance notice. a change in CBP policy or a fine.
CBP asserts that the Bayside Canadian Railway is not a “direct route” and therefore does not conform to its previous interpretations.