Seafood logistics groups sue to halt $350M in Jones Act fines
U.S. Customs and Border Protection has issued more than $350 million in penalty notices to several companies involved in shipping seafood from Dutch Harbor in Western Alaska to the eastern United States, according to a complaint filed in court from two of those companies.
The federal agency is alleging violations of the Jones Act, according to documents filed in the case. The law requires that vessels carrying goods between two U.S. points be American-made and American-flagged.
Kloosterboer International Forwarding and Alaska Reefer Management, providing transportation and logistics services as part of the American Seafoods Group family, filed the 35-page complaint in U.S. District Court in Anchorage on Sept. 2.
The two plaintiffs are suing to stop the penalties. They contract with ship owners, cold storage operators and trucking and fishing companies to transport frozen seafood. American Seafoods is a frozen-at-sea processor of Alaska pollock and other fish.
The supply chain works like this: The frozen fish leaves on ships from Dutch Harbor to the Lower 48, traveling through the Panama Canal to a port in eastern Canada near the U.S border.
From there, the fish is loaded onto trucks that are temporarily loaded onto flat rail cars along 100 feet of track before they drive into Maine. The seafood eventually reaches fast food restaurants and other outlets in several states.
The East Coast supply chain uses foreign-flagged vessels to deliver the seafood. But the companies claim they comply with the Jones Act because of a provision allowing an exemption, in part because the frozen seafood makes the brief trip from Canada by rail before it reaches Maine, the complaint says.
However, penalty notices have apparently been issued because the Canadian rail route is used, even though the agency has supported the route in its published interpretative rulings, the complaint says.
The suing companies say the notices threaten that long-established supply chain and jobs in Alaska and the Lower 48, according to the complaint.
“CBP’s penalty notices effectively have shut down a critical shipping route that — for over 20 years — has been approved by CBP as complying with the Jones Act, and which is essential to the delivery of frozen seafood to consumers, fast food chains, and school lunch and food bank programs throughout the United States,” the complaint asserts.
Customs and Border Protection “does not comment on matters under litigation,” the agency said in an emailed statement.
“Nonetheless, lack of comment should not be construed as agreement or stipulation with any of the allegations,” the statement said.
The penalties for Kloosterboer alone total $25 million, the complaint says. Numerous other companies in the plaintiffs’ supply chain have also received notices totaling more than $325 million, the complaint says.
“We are reeling from crippling penalties, Customs has not been forthcoming to share specifics, and Customs’ long-standing guidance tells us we are operating in compliance,” said Per Brautaset, president of Alaska Reefer Management, in a prepared statement on Sept. 2. “We just didn’t have a choice but to try and save our business and our partners’ businesses, and all the jobs in Alaska and other communities that will be lost.”
The fines are large, more than twice the annual value of frozen Alaskan seafood transported through the Bayside port to U.S. destinations, the statement said.
Dutch Harbor, in the Aleutian Islands, is home to the nation’s top fishing port in terms of landed volume. Close to 800 million pounds of fish, valued at $190 million, were landed there in 2019.
“This unjustifiable agency overreach is crippling and threatens to destroy plaintiffs’ businesses, along with an entire supply chain transporting frozen seafood from Alaska to the eastern United States through (the port of Bayside in New Brunswick, Canada),” the complaint says. “Moreover, the penalty notices are threatening hundreds of jobs in Alaska and throughout the U.S. in the frozen seafood shipping industry, and unless they are withdrawn, will likely result in higher prices and shortages of frozen seafood across the eastern United States.”
The companies are suing the U.S. Department of Homeland Security, the border protection agency, which falls under Homeland Security, and Troy Miller, acting commissioner of border protection.