Alaska Court Approves Settlement of Jones Act Penalty Suit on Canadian 'Bayside' Rail Line
The U.S. District Court for the District of Alaska on Feb. 8 approved a settlement between shipping companies Kloosterboer International Forwarding and Alaska Reefer Management and CBP and DOJ in the companies' suit against Jones Act penalties levied against them. The settlement's terms will see KIF and ARM pay $9.5 million, much less than the over $400 million sought by CBP for the Jones Act violations (Kloosterboer International Forwarding v. U.S., D. Alaska # 3:21-00198).
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CBP said KIF's and ARM's seafood shipments from Alaska to the eastern U.S. via a Canadian port on a Canadian-flagged ship violated the Jones Act, which says shipping between U.S. ports must be conducted by U.S.-flagged ships that are also U.S. made and owned. The companies said their shipments qualify for an exception to the act for transportation of merchandise between points in the U.S. via "through routes in part over Canadian rail lines."
The companies sought to fulfill this exception by putting their shipments on a Canadian train, the Bayside Canadian Rail, and sending them to a destination 100 feet away and back again. The goods were then sent to Maine to finish their journey. The court initially ruled the BCR failed other elements of this exception, setting up protracted litigation on CBP's treatment of the 100-foot rail line (see 2208030050). The settlement ends the lawsuit and revokes all of CBP's penalty notices.
The settlement also included "a release of all claims with respect to any party who was issued a Notice of Penalty and any other supply chain participant who shipped seafood on a foreign-flagged vessel from Alaska to the contiguous United States using the Bayside Canadian Railway."