Hearing set to determine fate of US CBP’s Jones Act fines against American Seafoods, pollock transporters

Published on
September 17, 2021
U.S. District Court Judge for the District of Alaska Sharon L. Gleason is set to decide whether to intervene in an effort by Customs and Border Protection to fine American Seafoods and other companies over a transportation line that brings Alaska pollock to the U.S. East Coast, which the agency has ruled violates the Jones Act.

U.S. District Court Judge for the District of Alaska Sharon L. Gleason is set to decide whether to intervene in an effort by Customs and Border Protection to fine American Seafoods and other companies over a transportation line that brings Alaska pollock to the U.S. East Coast, which the agency has ruled violates the Jones Act.

The hearing is scheduled for 10 a.m. Alaska Daylight Time, which is 2 p.m. Eastern Standard time., on Friday, 17 September. Gleason will likely rule whether to grant a request from American Seafoods subsidiary Alaska Reefer Management (ARM) and Kloosterboer International Forwarding for a temporary restraining order and preliminary injunction against the CBP’s issuance of USD 350 million (EUR 294.3 million) in fines against them and their business partners.

ARM and KIM, which operates a dead-end, 100-foot rail line in New Brunswick, Canada, claim they use the railway as part of the so-called Bayside Program, which they contend was granted a waiver under the third proviso of the Jones Act, a law that requires transportation of domestically-caught seafood on U.S.-built and U.S.-owned vessels. But in August, CBP began issuing more than 170 notices to entities involved in the program, alleging it was unaware of the use of the railway until recently and calling it “a calculated and secret scheme.”

In a sworn affidavit, American Seafoods President Inge Andreassen urged Gleason to grant an injunction that would halt the issuance of more fines and not require the payment of fines already issued.

“Unless we are able to resume the shipment of frozen seafood product to the Eastern U.S., [American Seafoods] faces a likelihood of immediate irreparable harm,” he wrote.

Andreassen warned pollock shipments currently held up due to fears over CBP enforcement are piling up across the U.S.

“Approximately 1.5 million pounds will be overdue for delivery to customers by end of September, approximately three million pounds likely at risk for October requirements; and several million pounds due in November and December, for which plans are unknown at present,” he wrote. “I understand that in opposing the Motion, the government argues there are viable transportation alternatives to transport seafood products from Dutch Harbor, Alaska, to the Eastern U.S. Based upon my experience and information, there are very limited viable short-term transportation options to transport frozen seafood products from Dutch Harbor to the Eastern U.S. in time to meet the delivery schedule and contractual requirements of [American’s] customers. In addition, the four shipping companies providing shipping service from Dutch Harbor will be extremely challenged over the balance of the year to reliably and expeditiously transport ASC’s seafood products to its Eastern U.S. customers in time to satisfy our delivery obligations.”

Andreassen warned the overlap of Alaska’s “B” season for pollock coinciding with the end of Alaska’s commercial salmon-fishing season has created a bottleneck in the supply chain.

“Even assuming that the shipping declarants, collectively, were able to secure the necessary equipment to timely move to the Western U.S. all of the frozen seafood of ASC and other shippers (and no facts support any such assumption), and then transport the frozen seafood to the Eastern U.S. via truck or rail (assuming the required capacity existed, with current container shortage worldwide), timely delivery of the product to the Eastern U.S. would be highly unlikely and unable to prevent the collapse of the supply chain,” he wrote. “Cold-storage availability and cross-country transportation options have been a challenge for years for every seafood company shipping products across the U.S. Even if we could move all of [American’s] U.S.-bound seafood product to the Western U.S. by the end of September, which we cannot, we will not be able to meet our customers’ deadlines for receiving this product.”

Despite Andreassen’s declaration that “the four shippers providing service from Dutch Harbor will be extremely challenged over the balance of the year to reliably and expeditiously transport seafood products to the contiguous United States,” all four of those shippers, in their own sworn affidavits, said they did indeed have capacity to handle the added volumes.

Alaska Marine Lines President Kevin Anderson, Matson Navigation President John Lauer, Coastal President Peter D. Strong, and Samson Tug and Barge President and CEO George Baggen all wrote they believed the Jones Act-compliant shippers servicing Dutch Harbor had sufficient capaibilities to handle the added volumes that would result if foreign vessels were no longer allowed to use the Bayside Program to transport them.

“Matson believes that it has ample vessel capacity to handle at least three times as much fish and fish products produced in Alaska as it carries today on an annual basis. Indeed, Matson (and its predecessor) has sailed from Dutch Harbor to Tacoma with empty container slots for many years,” Lauer wrote. “Matson believes that it and other U.S. Jones Act-compliant carriers will be able to carry all future catches of Alaska seafood intended for the lower 48 states to Washington State if the current ocean carriers that are violating the Jones Act stop violating the Jones Act. From Washington, such containers of seafood would be moved to their final destinations by U.S. railroads or trucking.”

Strong said Coastal had seen bookings for transportation of fish from Alaska increase “substantially” since CBP began issuing its fines in August.

“Coastal believes that there is currently more than adequate service between Alaska and the lower 48 states provided by qualified Jones Act carriers to transport all fish and fish products produced in Alaska,” he wrote.

Anderson said his company has been able to handle all added volumes thus far.

“AML has to-date been able to accommodate all booking requests for the transportation of seafood products from Alaska to the lower 48 states,” he wrote. “With reasonable notice and planning, U.S. railroads will clear logistical bottlenecks that may be currently limiting their capacity, and will be able to efficiently move seafood products from Seattle to the eastern seaboard.”

Baggen issued a strong defense of the Jones Act, echoing the arguments of his three peers in the Alaska shipping sector.

“Samson is harmed when cargoes reserved for qualified U.S.-flag vessels by the Jones Act are diverted to foreign-flag vessels with foreign ownership and non-U.S. citizen crews operating in violation of the Jones Act. Samson has been harmed over many years by the scheme to ship cargoes on foreign- flag vessels from Alaska to destinations in the United States, which is clearly transportation of merchandise encompassed by the Jones Act via use of a contrived Canadian rail apparatus, abuses of through shipment and storage in a foreign cold storage. Cargoes shipped in violation of the Jones Act from Alaska to the lower 48 states which Samson and similarly-situated carriers should have transported are not recoverable by Samson and other carriers which have been harmed by the loss of cargo,” he wrote. “Samson believes that there is currently more than adequate service between Alaska and the lower 48 states provided by qualified Jones Act carriers to transport all fish and fish products produced in Alaska.”

Photo courtesy of U.S. District Court for the District of Alaska

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