CBP Requests Alaska District Court to Reconsider Injunction on Jones Act Penalties

CBP on Oct. 18 asked the Alaska U.S. District Court to reconsider a temporary restraining order it issued on Jones Act penalties levied against Alaskan shipping companies, arguing that the TRO is "overbroad." Seeking to preserve its right to issue Jones Act penalties on shipments for which the five-year statute of limitations may run out, CBP wants to change the injunction from applying to any penalty notices relating to the Jones Act violation in question to just applying to penalty notices issued on or after Sept. 30 (Kloosterboer International Forwarding LLC, et al. v. United States, D. Alaska #3:21-00198).

Judge Sharon Gleason granted the injunction on Oct. 10 after originally denying one. The judge changed her tune after the two plaintiffs, Kloosterboer International Forwarding and Alaska Reefer Management, successfully showed that they had a likelihood to succeed on the merits of the case.

The two companies ship seafood from Alaska to the eastern U.S. via the Bayside, New Brunswick, Canada port. CBP said that this route violates the Jones Act -- the law requiring shipping between U.S. ports to be conducted using U.S.-flagged, -made and -owned ships. KIF and ARM shipped seafood from a U.S. port in Alaska to the East Coast on a Canadian-flagged ship.

To skirt the Jones Act, however, KIF and ARM argue that their shipments qualify for the Third Proviso exception, which says that the act doesn't apply to the transportation of merchandise between points in the U.S. "over through routes in part over Canadian rail lines and connecting water facilities if the routes are recognized by the Surface Transportation Board (STB) and rate tariffs for the routes have been filed with the Board." The companies met these conditions by putting their shipments on a train in Canada, sending them to a destination 100 feet away and bringing the train right back. From there, the shipments finished their journey to Maine. CBP called out this practice, and now KIF and ARM face penalties of up to $25 million for the violations.

In her original denial of an injunction on these penalties, Gleason said that the pair's case raised legitimate questions, but that they clearly did not meet one of the key requirements for qualifying for the Third Proviso: they hadn't filed a rate tariff with the STB. So, KIF and ARM went back and filed a rate tariff with the board, leading to the judge granting the injunction.

"Because of the applicable statute of limitations, the Court’s overbroad injunction threatens to impair Defendants’ ability to ever collect penalties for likely violations of the Jones Act," CBP's motion said. "Plaintiffs have been engaged in this scheme since 2012. If Defendants cannot issue and enforce Notices of Penalty for violations of the Jones Act relating to shipments of seafood products into the United States via the BCR Route prior to September 30, 2021, some claims may become time-barred because of the five-year statute of limitations."

CBP also argued against the idea that KIF and ARM showed that they are likely to succeed on the merits. Since the two companies only filed the rate tariff with STB on Sept. 30, CBP says that they have not shown that they could succeed in their case for shipments made before they filed the rate tariff.