Judge denies Kloosterboer International Forwarding, Alaska Reefer Management request for relief from CBP fines

A U.S. judge has denied requests from companies affiliated with pollock fishing firm American Seafoods to issue a temporary restraining order on U.S. Customs and Border Protection to prevent it from issuing fines for violation of the Jones Act.

U.S. District Court Judge for the District of Alaska Sharon L. Gleason ruled American Seafoods subsidiaries Alaska Reefer Management LLC (ARM) and Kloosterboer International Forwarding LLC (KIF) had failed to file a rate tariff application with the U.S. Surface Transportation Board for a transportation route for Alaska pollock shipped to the U.S. East Coast via New Brunswick, Canada, when they altered that route in 2012 by using a 100-foot, dead-end railway to meet the requirement that their fish travel by rail in Canada.

Beginning in August, the CBP began issuing fines against American Seafoods and other companies associated with the Canadian route, known as the Bayside Program, alleging the altered route violated the Jones Act, which prohibits transportation of domestically-caught seafood and any other goods of U.S. origin inside the country unless the vessel is U.S.-built and U.S.-owned. Currently, the Bayside Program utilizes container ships that are not Jones Act-compliant to bring fish from Alaska to New Brunswick. Thus far, CBP has issued at least USD 350 million (EUR 294.3 million) in fines related to the Bayside Program.

KIP and ARM sued CBP on 2 September, asking for a temporary restraining order and preliminary injunction to prevent CBP from issuing additional fines and to prohibit it from collecting on the fines it had already issued. The two companies said they qualified for an exemption to the Jones Act known as the third proviso, which they said had been approved for a route previously approved by the CBP. But CBP argued the companies had substantially altered the route through the use of the 100-foot railway, thereby invalidating their third proviso exemption.

Gleason cited the fact that KIP and ARM had not filed a rate tariff for the amended route as critical in her decision.

“A person of ordinary intelligence had a reasonable opportunity to know … that a rate tariff needed to be filed with the STB to comply with the third proviso. Plaintiffs even likely had direct knowledge of the tariff requirement and still failed to act accordingly,” she wrote in her 28 September decision. “Accordingly, the court finds that plaintiffs have not demonstrated a likelihood of success on their due process claim at this time.”

Gleason acknowledged the two transportation routes “appear to be substantially identical to other Canadian rail lines on which merchandise is carried solely to comply with the third proviso,” and pointed out “CBP did not accord any notice or comment period prior to issuing the penalty notices in this case,” but did not agree with arguments by KIP and ARM that their rights to due process and reasonable penalties had been violated. But Gleason encouraged KIF and ARM to renew their request for injunctive relief after they updated their tariff filing and pursued negotiations on administrative remedies directly with CBP. 

“These remedies will be addressed within a week and the original motion filed by KIF and ARM will be renewed with the court at that time,” the companies said in a 29 September press release.

“As a result of this outcome, which in large part is positive, we will not be able to resume trucking goods as fast as we had hoped,” ARM President Per Brautaset said in the release. “However, we are encouraged and will continue to pursue the available legal and administrative options to resolve this issue.” 

Gleason said a filing for remission or mitigation of the CBP penalties could lead to a remitting or decreasing of the fines, and that CBP still must file a collection action, which gives KIP and ARM time to allow the case to be heard in court before paying any fines.

Photo courtesy of Alaska Reefer Management


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