American Seafoods subsidiaries Kloosterboer International Forwarding (KIF) and Alaska Reefer Management (ARM) have settled a dispute with U.S. officials, avoiding over USD 400 million (EUR 359 million) in fines.
The companies announced they reached a resolution with U.S. Customs and Border Protection (CBP) and the U.S. Department of Justice (DOJ) 19 July. Under the terms of the settlement, CBP will withdraw Notices of Penalty issued to the two companies – which carried nearly USD 400 million (EUR 359 million) in fines – in exchange for a payment of USD 9.5 million (EUR 8.5 million).
The saga between CBP, the DOJ, and the two American Seafoods subsidiaries began in 2021 when the CBP issued approximately USD 350 million (EUR 314 million) in fines related to the use of an intermodal facility in the Canadian province of New Brunswick used to transport Alaskan seafood to the U.S. East Coast. In its penalty notices, the CBP alleged that the transportation method constituted a “calculated and secret scheme” to escape restrictions of the Jones Act.
The Jones Act requires all seafood caught domestically in the U.S. be transported via vessels built in the U.S. with U.S. materials. The two companies, KIF and ARM, used foreign-flagged and -built ships to transport fish from Alaska to a railyard in Canada, where all cargo would then take a 100-foot roundtrip rail journey in a process known as the Bayside Program.
The original lawsuit by KIF and ARM alleged that the transportation method and short rail journey was approved as exempted from the Jones Act requirements under the “third proviso,” which allows limited exemptions for countries transporting goods from Alaska because the state is not contiguously connected to the rest of the country.
The short rail route was established in 2012, and ARM and KIF claimed that the CBP allowed the route to be used as a method to ship fish into the U.S. with no complaint. Then in August 2021 the CBP issued millions in fines for violations over the many years of the program, and called the Bayside Program a blatant attempt to evade the requirements of the Jones Act.
The CBP claimed the two companies did not follow proper procedure for requesting a review of Jones Act compliance when they switched to using the short rail line in 2012.
“Plaintiffs are experienced importers of merchandise who know how to seek an administrative ruling as to the applicability of the third proviso from CBP by fully disclosing their change in operations,” CBP wrote at the time.
The CBP fines froze shipments of at least 26 million pounds of Alaska pollock and caused supply chain chaos on the U.S. East Coast before U.S. District Court Judge for the District of Alaska Sharon L. Gleason issued a ruling freeing it up to enter the country.
Now, the companies have resolved the lawsuit and will avoid the full extent of the fines.
“We are very pleased that the CBP and DOJ have agreed to withdraw all Notices of Penalty and that litigation will be dismissed for all matters related to the Bayside Canadian Railway dispute,” ARM President Per Brautaset said in a release. “Resolving this matter is a positive development for our companies and the broader U.S. seafood industry.”
The Bayside Program, meanwhile, has since been rendered defunct after a court ruling on 25 May, 2022 found it was not in compliance with the Jones Act. The decision has forced KIF and ARM to transport seafood from Alaska to the mainland U.S. using other means. Brautaset said the company “will continue providing reliable and cost-effective transportation and logistics to deliver high-quality, sustainable, Wild Caught Alaskan seafood products for our customers.”
“We KIF and ARM are dedicated to serving their customers in the U.S. and around the world, enabling a prosperous future for the seafood industry,” he said.
Photo courtesy of U.S. District Court for the District of Alaska
